The Elgar Companion to the Eurasian Economic Union 1800374992, 9781800374997

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THE ELGAR COMPANION TO THE EURASIAN ECONOMIC UNION

ELGAR COMPANIONS TO INTERNATIONAL ORGANISATIONS The Elgar Companions to International Organisations series comprises original reference works on individual organisations within the international arena. In addition to detailing the historical background of the organisation in question, each book examines the respective rules, procedure, and capacity for law-making of that organisation. They examine the impact the organisation has had on a particular field of law, and the role that it plays in the wider world. Designed for use by specialists in the field and for more general reference, the books represent the insight and analysis of teams of experts. For a full list of Edward Elgar published titles, including the titles in this series, visit our website at www​.e​-elgar​.com​.

The Elgar Companion to the Eurasian Economic Union Edited by

Alexander Libman Professor of Russian and East European Politics, Institute for East European Studies, Freie Universität Berlin, Germany

Evgeny Vinokurov Chief Eсonomist, Eurasian Development Bank, Almaty, Kazakhstan

ELGAR COMPANIONS TO INTERNATIONAL ORGANISATIONS

Cheltenham, UK • Northampton, MA, USA

© Alexander Libman and Evgeny Vinokurov 2024

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA A catalogue record for this book is available from the British Library Library of Congress Control Number: 2023952042 This book is available electronically in the Political Science and Public Policy subject collection http://dx.doi.org/10.4337/9781800375000

ISBN 978 1 80037 499 7 (cased) ISBN 978 1 80037 500 0 (eBook)

EEP BoX

Contents

List of figuresvii List of tablesviii List of contributorsix List of abbreviationsxi 1

Introduction to The Elgar Companion to the Eurasian Economic Union1 Evgeny Vinokurov

PART I

HISTORY AND IDEATIONAL FOUNDATIONS

2

What is Eurasia and Eurasianism? Dmitrii Kofanov and Yoshiko M. Herrera

13

3

From the Customs Union to the Eurasian Economic Union Richard Sakwa

27

PART II

COMMON MARKETS AND INSTITUTIONS

4

Trade, Customs Union, and the EAEU Common External Tariff Alexander Knobel and Nikita Pyzhikov

41

5

Functional markets of the EAEU: selected case studies Viachaslau Yarashevich

59

6

Mutual foreign direct investments in the EAEU Anton Malakhov and Evgeny Vinokurov

79

7

Labor markets and migration Andrei Korobkov

92

8

Crisis finance in Eurasia: the Eurasian Fund for Stabilization and Development108 Barbara Fritz and Laurissa Mühlich

9

EAEU institutions Vladimir Pereboev and Taras Tsukarev

122

PART III EXTERNAL ENVIRONMENT 10

EAEU and the European Union Tom Casier

138

11

EAEU and Belt and Road Initiative Marcin Kaczmarski

153 v

vi  The Elgar companion to the Eurasian Economic Union 12

EAEU and other post-Soviet integration organizations Murad Nasibov and Andrea Gawrich

163

13

EAEU and Greater Eurasia: mission impossible? Jacopo Maria Pepe

177

PART IV PERSPECTIVES 14

EAEU and authoritarian regionalism Alessandra Russo

192

15

Power asymmetries and integration process: challenges ahead for the EAEU208 Federico Salvati

16

EAEU and economic sanctions Alexander Libman

17

“Made in Kyrgyzstan”: an ethnographic exploration of “new entrepreneurs” entering the Eurasian Economic Union Philipp Schröder

240

18

Conclusion to The Elgar Companion to the Eurasian Economic Union: Eurasian Economic Union at the crossroads Alexander Libman

252

227

Index262

Figures

4.1

Contribution of Eurasian integration to the growth of EAEU mutual trade, 2016–2021

45

4.2

Comparison of EAEU external and mutual trade volumes for 2015–2021, in bn USD and in % of previous period

45

4.3

Coverage of rules of origin until 2021

54

5.1

EAEU’s mutual trade in agriculture commodities in 2015–2020

65

5.2

Role of agriculture in EAEU’s output and employment in 2015–2019

65

6.1

Mutual FDI stock of the CIS and EAEU countries, $ billions

84

6.2

Sectoral structure of mutual FDI in the EAEU, %

86

8.1

IMF and EFSD lending capacity per country for three years as % of GDP 2020

116

8.2

GFSN COVID-19 crisis finance in EFSD member countries as share of total external crisis finance per country in %

118

12.1

Documents (decisions, agreements and declarations) adopted by the CIS

169

13.1

China’s trade with Russia 2000–2021, in billion USD

182

13.2

EU and China exports to Greater Eurasia, aggregated by subregions, in billion USD, 2000–2021

183

vii

Tables

1.1

Macroeconomic and social indicators of the EAEU, 2014–2021

9

1.2

Macroeconomic and social indicators of the EAEU member states, 2014–2021

9

4.1

The volume of mutual trade in goods (intra-regional exports) of the EAEU member states in 2010–2021, bn US dollars

43

4.2

Commodity structure of mutual trade (intra-regional exports) of EAEU member states in 2015 and 2021, as % of total

44

4.3

Aggregated structure of EEU merchandise exports to third countries in 2015 and 2021, as % of total

46

4.4

Aggregated structure of EEU merchandise imports from third countries in 2015 and 2021, as % of total

47

4.5

Comparative legal analysis of the scenario of Armenia and Kyrgyzstan (accession to the WTO precedes accession to the EAEU) and the scenario of Kazakhstan (accession to the EAEU precedes accession to the WTO)

50

5.1

Selected indicators of the EAEU’s mutual trade, 2015–2020

69

5.2

Selected indicators of the EAEU’s medicinal market, 2014–2021

72

5.3

Selected indicators of the EAEU’s medical equipment market, 2014–2021

72

6.1

FDI stock of EAEU member states, $ millions

81

6.2

FDI stock in 2021, $ millions

83

6.3

Mutual investments in different economic blocs

85

6.4

Mutual FDI stock of the EAEU member states as at June 2022, $ millions

85

7.1

Russian R&D dynamics, 1992–2018

103

8.1

EFSD capital structure

113

8.2

Lending conditions EFSD

115

9.1

Appeals and complaints to the EAEU Court (2015–2022)

133

viii

Contributors

Tom Casier, Professor in Global Politics of Europe, University of Groningen, Groningen, The Netherlands Barbara Fritz, Professor for Latin American Economics, Institute for Latin American Studies, Freie Universität Berlin, Berlin, Germany Andrea Gawrich, Professor for International Integration with a special focus on Eastern Europe, Institute of Political Science, Justus-Liebig University of Giessen, Giessen, Germany Yoshiko M. Herrera, Professor, Department of Political Science, University of Wisconsin-Madison, Madison, Wisconsin, USA Marcin Kaczmarski, Lecturer in Security Studies, School of Social and Political Sciences, University of Glasgow, Glasgow, UK Alexander Knobel, Head of Institute for International Economy and Finance, Russian Foreign Trade Academy, Moscow, Russia; Head of International Trade Department, Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia Dmitrii Kofanov, Post-Doctoral Associate, Center for Governance and Markets, Graduate School of Public and International Affairs, University of Pittsburgh, Pittsburgh, USA Andrei Korobkov, Professor of Political Science and International Relations, Department of Political Science and International Relations, Middle Tennessee State University, Muffreesborro, USA Alexander Libman, Professor of Russian and East European Politics, Institute for East European Studies, Freie Universität Berlin, Berlin, Germany Anton Malakhov, Head of Projects, Research Department, Eurasian Development Bank, Almaty, Kazakhstan Laurissa Mühlich, Associate Researcher, Institute for Latin American Studies, Freie Universität Berlin, Berlin, Germany Murad Nasibov, Research Assistant, Institute of Political Science, Justus-Liebig University of Giessen, Giessen, Germany Jacopo Maria Pepe, Senior Researcher, Global Issue Division, German Institute for International and Security Affairs, Berlin, Germany Vladimir Pereboev, Head of Projects, Centre for Integration Studies, Eurasian Development Bank, Almaty, Kazakhstan Nikita Pyzhikov, Head of the Center for Economic Integration, Russian Foreign Trade Academy, Moscow, Russia ix

x  The Elgar companion to the Eurasian Economic Union Alessandra Russo, Associate Professor of Political Science, School of International Studies & Department of Sociology and Social Research, University of Trento, Trento, Italy Richard Sakwa, Emeritus Professor of Politics, University of Kent, Canterbury, UK; Senior Research Fellow, National Research University-Higher School of Economics, Moscow, Russia Federico Salvati, PhD candidate, SCRIPT research cluster, Freie Universität Berlin, Berlin, Germany Philipp Schröder, Associate Professor of Anthropology, Department of Sociology and Anthropology, Nazarbayev University, Astana, Kazakhstan Taras Tsukarev, Head of Macroeconomic Analysis and Statistics Unit, Chief Economist Group, Eurasian Fund for Stabilization and Development, Almaty, Kazakhstan Evgeny Vinokurov, Chief Eсonomist, Eurasian Development Bank, Almaty, Kazakhstan Viachaslau Yarashevich, Associate Professor, Department of International Economic Relations, Belarusian State Economic University, Minsk, Belarus

Abbreviations

AA ACF ADB ALBA AMF ASEAN ASEEES BRI BRICS CBR CES CET CICA CIS CIS-IPA CMI CMIM CNFEA COMECON CRA CST CSTO CU or EACU DCFTA EAC EAEC EAEU EAG EaP EaU

Association Agreement Eurasian Anti-Crisis Fund Asian Development Bank Bolivarian Alliance for the Peoples of Our America Arab Monetary Fund Association of Southeast Asian Nations Association for Slavic, East European, and Eurasian Studies Belt and Road Initiative Brazil, Russia, India, China and South Africa Central Bank of the Russian Federation Common Economic Space Common External Tariff Conference on Interaction and Confidence Building Measures in Asia Commonwealth of Independent States Inter-Parliamentary Assembly of the Commonwealth of Independent States Chiang Mai Initiative Chiang Mai Initiative Multilateralization Common Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union Council for Mutual Economic Assistance BRICS Contingent Reserve Agreement Collective Security Treaty Collective Security Treaty Organization  Customs Union or Eurasian Customs Union Deep and Comprehensive Free Trade Area Eurasian Conformity mark Eurasian Economic Commission Eurasian Economic Union Eurasian Group on Combating Money Laundering and Terrorist Financing Eastern Partnership Eurasian Union xi

xii  The Elgar companion to the Eurasian Economic Union EDB EFSD ENP ESM EU EurAsEC FDI FLAR FSU FT FTA GDP GEP GFSN GMP GUUAM or GUAM HEEC IIS ILO IMF IOM IOs ISO MDB MERCOSUR MMI NAFTA NATO NTBs ODIHR OECD OFDI OSCE PBOC PPP REO

Eurasian Development Bank Eurasian Fund for Stabilization and Development European Neighbourhood Policy European Stability Mechanism European Union Eurasian Economic Community foreign direct investment Latin American Reserve Fund former Soviet Union founding Treaty free trade area / agreement gross domestic product Greater Eurasian Partnership global financial safety net good manufacturing practice GUAM Organization for Democracy and Economic Development  Higher Eurasian Economic Council Integrated Information System International Labour Organization International Monetary Fund International Organization for Migration international organizations International Organization for Standardization multilateral development bank Southern Common Market Monitoring of Mutual Investments North American Free Trade Agreement North Atlantic Treaty Organization non-tariff barriers to trade OSCE’s Office for Democratic Institutions and Human Rights Organisation for Economic Co-operation and Development outward foreign direct investment Organization for Security and Co-operation in Europe  People’s Bank of China purchasing power parity regional economic organization

Abbreviations  xiii RF RFA RKDF RO RZhD SAARC SCO SEEC SES SITC SOE SPFS SREB SU SWIFT TEU TNC UNCTAD USMCA USRB USSR UTLC WTO

Russian Federation regional financial arrangement Russian-Kyrgyz Development Fund regional organization Russian Railways South Asian Association for Regional Cooperation Shanghai Cooperation Organisation Supreme Eurasian Economic Council Single Economic Space Standard International Trade Classification state-owned enterprise System for Transfer of Financial Messages Silk Road Economic Belt Soviet Union Society for Worldwide Interbank Financial Telecommunication Twenty-foot equivalent unit transnational corporation United Nations Conference on Trade and Development Agreement between the United States of America, the United Mexican States, and Canada Union State of Russia and Belarus Union of Soviet Socialist Republics United Transport and Logistics Company World Trade Organization

1. Introduction to The Elgar Companion to the Eurasian Economic Union Evgeny Vinokurov

1.1 YOUR COMPANION TO THE EURASIAN ECONOMIC UNION1 The Eurasian Economic Union (EAEU) is a young regional organization. It began functioning as a customs union in 2011, and became a full-fledged regional economic organization on 1 January 2015. This Companion provides extensive analysis of this organization, its mandate, common markets, and other aspects of its work, history, and outlook. To understand the EAEU better, in particular in the post-2022 environment, there are multiple chapters analysing EAEU structural features, the external environment, and Eurasian regionalism in general. While some of the chapters take a broader perspective, this book’s primary goal is to become your Companion to the Eurasian Economic Union as a regional integration institution. Its immediate story began when Russia, Belarus, and Kazakhstan signed an agreement to create a common customs territory and form the Customs Union (CU) in 2007, while ordering an international working group to draft the relevant documents in two years. There were understandable doubts about whether they would succeed, given the multiple “false starts” of the 1990s and 2000s (see Chapter 2 of this volume; also Vinokurov, 2018). However, on 19 December 2009, the heads of these three states signed the Joint Declaration on the Establishment of a Customs Union. On 1 January 2010, the common customs tariff took effect. In 2011, the CU of Belarus, Russia, and Kazakhstan began its normal operations, and, in 2012, seventeen additional agreements forming the basis of the Single Economic Space (SES) took effect. These agreements governed a number of key topics in the economic convergence – from coordinating macroeconomic policy to labour migration. While the Customs Union formed the core of the prospective EAEU, these 17 agreements served as predecessors of its additional elements. Then, on 1 January 2015, the Treaty on the Eurasian Economic Union took effect. The Treaty codified and expanded all prior agreements regarding both the work of the Customs Union and the development of additional areas of integration. It enshrined the EAEU’s institutional structure (see Chapter 4) and detailed a roadmap for the elimination of exemptions from the common market (see Chapters 4 and 5). While the Eurasian Economic Commission had already come into existence in 2012 to govern the Customs Union, the EAEU’s decision-making bodies, the Supreme and Intergovernmental Councils, became operational

1 We are grateful to our editor Daniel Mather at Edward Elgar, for his constant encouragement and benevolent attitude. We sincerely thank our authors, who stuck to the idea of this volume despite drastic changes in the external environment that affected the Eurasian Economic Union. Our assistant at the Freie Universität Berlin, Zhang Shilong, was instrumental in editing the chapters of the Companion.

1

2  The Elgar companion to the Eurasian Economic Union together with the Treaty (see Chapter 9). Armenia and the Kyrgyz Republic were not founding members but joined the organization very early on, in January and May 2015, respectively. To compile this volume, we assembled an international group of established academic experts on the EAEU and Eurasian regionalism in general. We wanted to put together various perspectives and backgrounds to do justice to the complex reality surrounding the subject of our study. At a time of conflict and strife, this Companion includes contributions from authors from Belarus, Germany, Italy, Kazakhstan, Russia, Spain, the UK, and the USA. They are political scientists, economists, social scientists, and legal scholars. At a meeting while drafting this Companion, we asked the contributors to outline some possible trends affecting the Eurasian Economic Union post-2022 and to elaborate them in the Outlook section of their respective chapters. The group then discussed some possible trends. For example, we proposed the “Bureaucracy muddles through” scenario, wherein the bureaucratic structures try to continue business as usual, despite the major changes in the world. Another one was “Hidden transformation”: although the EAEU remains de jure the same, there may be important changes that an outsider would fail to see immediately, driven by the fundamental changes in Eurasia. These are likely to be associated with “Securitization” – the growing role of power in Russia’s strategic conceptions and in all aspects of international relations in Eurasia. There was also a line of reasoning that the EAEU may have been affected by a number of long-term trends that did not change over time, despite the drastic political changes (“Persisting long-term trends”). We also discussed potential “Changes in the balance of power” that might occur as the smaller states of Eurasia gain relatively greater power and exercise pressure in the EAEU. Alternatively, smaller states might use their new power to distance themselves from Russia. Finally, one needs to take into account the direct “Technical consequences of sanctions” for economic cooperation in Eurasia: the exclusion of Russia from international payment systems, for example, can affect interactions in Eurasia directly. To be sure, all current trends are uncertain and these scenarios serve primarily to stimulate reasoning and imagination in thinking about future prospects. Nevertheless, we are certain that this exercise was useful. You will find many of these scenarios reflected in the Outlook sections, where our contributors suggest the future evolution of the Eurasian Union. The Conclusion (Chapter 18) provides an analytical summary of these “building blocks”, which can be used for thinking about the future of the EAEU and regionalism in post-Soviet Eurasia. A few years ago, the editors of this Companion published a book entitled Re-Evaluating Regional Organizations: Behind the Smokescreen of Official Mandates (Vinokurov & Libman, 2017). We based our research on a large dataset of 62 regional economic organizations (REOs) all around world, which we made fully available to the public. The Eurasian Economic Union is one of these 62 REOs. Our exploration produced some interesting results, including some counter-intuitive ones. We found six basic types of regional economic organizations. These include “Alive and Kicking” REOs); “Alternative Path” REOs (which, explicitly or implicitly, alter their mandate over time); “Integration Rhetoric” REOs (which can be a valid political tool but do not have much economic substance); “Talking Clubs” (they are exactly what the name implies, but their impact as a venue for high-level communication is often underestimated); “Zombie” REOs (which support bureaucratic rent-seeking and not much else); and “Comas” that exist only on paper. We found that the Zombies and Comas were surprisingly small groups. It seems that, in practice, once a regional economic organization has been established, it at least “muddles

Introduction  3 through”, often mutating into a Talking Club or being used to promote politically induced integration rhetoric or acquiring some quite new functions. However, it does not die out. What can we say about the EAEU based on these findings? First, the Eurasian Union is clearly “alive and kicking”, even taking into account its multiple shortcomings. The organization enjoys a rich economic mandate, which comprises not only mutual trade in goods and services but also free trade agreements, technical regulations and standards, a common financial market, macro monitoring, and much else. Throughout its history, its member states, in particular Kazakhstan, have repeatedly fended off attempts to enlarge its mandate by including non-economic items (hence, no “alternative path”). Generally, we do not see much evidence that the EAEU is on the way to becoming another type of REO. However, while discussing the EAEU’s future path, we should always be mindful of the possibility of this institution becoming more devoid of substance and turning into a talking club and a vehicle for integration rhetoric.

1.2

EVOLVING LITERATURE ON THE EAEU AND THIS COMPANION

For many years, regionalism among countries of post-Soviet Eurasia remained outside the scope of attention of students of comparative regionalism. Eurasian regional integration was perceived as a disappearing reality, which will cease to exist soon after the legacies of the Soviet Union wear off. Most regional organizations in Eurasia remained “ink on paper” and were characterized by substantial implementation gaps. The situation changed, however, in the 2010s, with the establishment of the Customs Union of Russia, Belarus, and Kazakhstan, which in 2015 was transformed into the Eurasian Economic Union. The EAEU is a functioning regional organization, which has managed to achieve substantial progress in economic integration, although it also faces significant problems and deficits. The EAEU plays an important role in foreign economic policy considerations of the Eurasian countries. For companies investing in the post-Soviet countries, dealing with the opportunities and limitations created by the EAEU is a necessary part of their business strategies. The growing importance of the EAEU was matched by the growing body of scholarship devoted to this organization (primarily in economics and political science, but also in law and sociology). However, this research is fragmented, and there is little communication among scholars writing about the EAEU. This is largely driven by the fact that scholarly interest in the EAEU originates from various disciplinary foci: studies of Russian and post-Soviet foreign policy, regional integration studies, bureaucratic politics, research on ideologies and historical legacies, etc. As the EAEU is a young organization, EAEU-related literature is a young and evolving domain. While by no means intending to provide a comprehensive overview, we would like to mention a few books for the benefit of students of Eurasian integration. These include Libman and Vinokurov (2012), Dragneva and Wolczuk (2013), Vymyatnina and Antonova (2014), Vasilyeva and Lagutina (2016), Hancock and Libman (2016), Lane (2017), Russo (2018), Vinokurov (2018), Dutkiewicz and Sakwa (2018), Obydenkova and Libman (2019), and Mukhametdinov (2020).

4  The Elgar companion to the Eurasian Economic Union The situation again changed drastically in 2022, with the EAEU, on the one hand, acquiring new importance for its member states, and, on the other, becoming subject to multiple new challenges that may threaten its long-term relevance. This new reality awaits its thorough scientific assessment. The current volume intends to be helpful in this process. The Companion intends to contribute to closing several gaps by providing an in-depth systematic discussion of the Eurasian Economic Union including its evolution, current states, and prospects. Each chapter is an original scholarly contribution, critically reviewing the available evidence on the EAEU and highlighting possible gaps in our knowledge. This breadth and level of analysis allow us to suggest that the book would serve as a reference on the Eurasian Union for a wide audience.

1.3

STRUCTURE OF THE COMPANION

The volume consists of 18 chapters, organized in four sections, including this introduction and a substantive conclusion. Following this “Introduction” by Evgeny Vinokurov, we delve into the history and ideational foundations of the EAEU. Part I, “History and Ideational Foundations”, starts with Chapter 2, “What is Eurasia and Eurasianism?”, by Dmitrii Kofanov and Yoshiko M. Herrera. This is an essential contribution as it provides structure to the field and helps the reader to thoroughly understand ambiguous terms and concepts. The chapter investigates the origin and distinct meanings of Eurasia and Eurasianism. “Eurasia” is a term that has different meanings depending on the context in which it is used. It can be understood as a geographic entity, as a political and economic entity, as a constructivist concept, and as an object of distinct geopolitics. Richard Sakwa’s contribution, “From the Customs Union to the Eurasian Economic Union”, neatly outlines the long history of Eurasian institutions, starting with the disintegration of the Soviet Union in 1991, which rapidly led to the establishment of the Commonwealth of Independent States (CIS) to manage a “civilized divorce” of the post-Soviet republics. Then, as a need for a more positive agenda became clear, the idea of a more integrated Eurasian Union emerged. There were several false starts along way, as well as the 14-year existence of the Eurasian Economic Community, the predecessor to the Eurasian Economic Union. You will encounter a mishmash of acronyms along the way – CIS, CU, EurAsEC, CES, again a new CU, and then SES. It is essential to understand this long and arduous evolution to better grasp the foundations, as well as the historically and politically strong and weak sides of the EAEU. Part II, “Common Markets and Institutions”, is the most extensive section in the Companion (six chapters), and for good reason. Here our contributors help the reader understand the EAEU’s various features, as well as how multiple EAEU institutional components function and interact. Chapter 4, “Trade, Customs Union, and the EAEU Common External Tariff”, by Alexander Knobel and Nikita Pyzhikov, may seem challenging, in particular for the non-economist, but we encourage you to read it carefully. The reason is the following. The EAEU may indeed seem like a Customs Union + (or ++, with many additional domains), since the common tariff forms the very core of the Union. Take that away, and the EAEU will fall apart. The EAEU is, at its core, a combination of a common market where market participants freely trade goods and services and a Common External Tariff for imports. The authors analyse mutual trade

Introduction  5 dynamics, assess the impact of Eurasian integration on member states’ trade, and identify obstacles to the single market. Then, they discuss key issues related to customs and tariff regulation: application of the Customs Code of the EAEU; Common Commodity Nomenclature to classify goods for customs purposes; the uniform rules of origin; the Common External Tariff; the distribution of import duties; exemptions from the Common External Tariff; the interaction between EAEU and WTO law; and the effect of Russia’s retaliatory measures (“anti-sanctions”) on the Customs Union regime. Chapter 5, “Functional Markets of the EAEU”, by Viachaslau Yarashevich, complements the previous one by reviewing three important common functional markets of the EAEU: agriculture, energy, and pharmaceuticals. The first two belong to the primary sector, the backbone of the EAEU’s economies. Pharmaceuticals are important insofar as this is the first common market to be regulated separately since the establishment of the Union; pharmaceuticals are a functional market properly belonging to secondary and tertiary sectors. The three case studies offer detailed inquiry into the regulatory frameworks for the three markets, their development and size, and the ways they fall short of the stated aims of the EAEU, particularly in light of the impact of the current sanctions regime and the COVID-19 pandemic. The author makes several insightful observations regarding the relation of the EAEU case to the major regional integration theories. Chapter 6, “Mutual Foreign Direct Investments in the EAEU”, by Anton Malakhov and Evgeny Vinokurov, discusses major trends in EAEU mutual investments, a major indicator and driver of the success or failure of regional economic integration. The chapter uses an original methodology and database. It outlines three major periods: rapid growth of mutual investments until 2012; then a period of decline (2012–2015) caused by the slowing economies, a regional economic crisis, and the severing of Russia–Ukraine relations; and then a slow growth from 2016 onward, wherein the EAEU factor played a positive role. The authors provide a detailed medium-term outlook facing the geopolitical crisis, as well as the ways in which the region addresses global trends and challenges (rising investments in the green economy, rising intra-Central Asia FDI, less FDI in the financial sector, and more cross-border greenfield projects). The major conclusion of the chapter is that mutual FDI in the EAEU probably peaked in 2021–2022. Chapter 7, “Labor Markets and Migration”, by Andrei Korobkov, turns to perhaps the most underestimated and low-key aspect of Eurasian economic integration and the EAEU mandate. In fact, Eurasia is among the world’s leaders in the density of labour migration. Labour migration is a major factor affecting livelihoods as well as the prosperity of several nations, with remittances reaching 25–30 per cent of GDP in the Kyrgyz Republic and Tajikistan, and 15–18 per cent in Armenia. Since the early 2000s, Russia and Kazakhstan have become major destinations for labour migrants coming from other post-Soviet states. The chapter reviews these migration flows and their development over time, as well as the EAEU’s rules and regulations and their ability to encourage labour migration (or to constrain it). The common labour market and an EAEU Agreement on the transportability of pensions are among these factors. Alongside the EAEU, several institutions form an ecosystem of Eurasian economic integration. They are not legally or managerially connected to the Union but do support some of the EAEU’s objectives. Barbara Fritz and Laurissa Mühlich in Chapter 8, “Crisis Finance in Eurasia”, contribute an excellent and informative case study on one of them, the Eurasian Fund for Stabilization and Development (EFSD). The EFSD was founded as an immediate response to the global financial crisis in 2008–2009, with the aim of providing the Eurasian region with

6  The Elgar companion to the Eurasian Economic Union its own regional IMF-like structure. The chapter locates the Fund within the global financial safety net (GFSN), describes the Fund’s most salient features, and compares it with other regional financial arrangements in other regions of the world, including Europe, Southeast Asia, the Middle East, and Latin America. Then comes Chapter 9, “EAEU Institutions”, by Vladimir Pereboev and Taras Tsukarev. This is another of the central and most data-rich contributions to the Companion. The chapter describes and evaluates the governing practices of the EAEU “family” of institutions, preceded by a section on the Treaty on the Eurasian Economic Union, which is the primary legal document of the EAEU and a roadmap for the development of the institution. The chapter then examines the main institutional features of the Supreme Eurasian Economic Council and the Eurasian Intergovernmental Council, as well as the Eurasian Economic Commission. A separate section is dedicated to the EAEU Court. Now that we are well acquainted with the contents of the Eurasian Economic Union, a section on the external environment in which the EAEU operates is due. All four chapters in Part III, “External Environment”, needed substantial rethinking in 2022–2023. The section starts with Chapter 10 by Tom Casier on “EAEU and the European Union”. The Ukraine crisis in 2014 intensified tensions between the EU and Russia, while the 2022 crisis brought constructive relations between them to a complete halt. The same was true for Belarus. Meanwhile, other EAEU member states did not follow the same logic and even intensified their trade, investment, and cultural relations with the EU and its countries. This is a big controversy that will undoubtedly influence further EAEU developments. Another, more theoretical, line of analysis is how the EU in its institutional design has influenced the EAEU. Moving from West to East, in Chapter 11, “EAEU and Belt and Road Initiative”, Marcin Kaczmarski examines the relationship between the EAEU and China’s Belt and Road Initiative (BRI). This exercise is difficult since the BRI, unlike the EAEU, lacks formal institutionalization. The BRI presents a qualitatively different approach than that of the EAEU, emphasizing flexibility, trade facilitation, and investment in infrastructure, but without a specific institutional framework. While the BRI did not explicitly undermine Russia’s political primacy in the post-Soviet space, it posed potential economic competition, as it overshadowed Russia’s capacity to maintain its economic influence. Generally, the relationship is constructive, as the objectives of the two projects broadly coincide. The EAEU–BRI relationship includes joint communications, declarations, and trade agreements. There is even a distinct success story – a 100-fold rise in China–EAEU–EU container transit over the last decade, up to 700,000 TEU. Nevertheless, there are reasons for uncertainty about what the future holds: Russia’s weakening position vis-à-vis China and the increasing scope of sanctions against Russia may change the calculations of smaller EAEU members, potentially increasing China’s influence in the region. Now, what about other integration organizations of various kinds that either are or were active in the region alongside the EAEU? In Chapter 12, “EAEU and Other Post-Soviet Integration Organizations”, Murad Nasibov and Andrea Gawrich address their interconnections and interactions, examining how they can lead to cooperation, competition, or coexistence. The authors discuss the growth of Eurasian international organizations (IOs) and the need for coordination and cooperation, while acknowledging their competition for limited resources and survival. The chapter distinguishes between interaction and interplay as two ways of understanding IO–IO relations, with interplay being indirect and unintentional. The distinction between normative and utilitarian interplay and direct interaction is

Introduction  7 explained, along with the potential for formalization and standardization resulting from IO interactions. Finally, the chapter applies this framework to analyse the EAEU’s relations with other post-Soviet organizations, emphasizing organizational interplay and limited interaction. Nasibov and Gawrich’s analysis encompasses a wide spectrum of organizations, including the EurAsEC, the CIS, GUUAM, and the CSTO. Chapter 13 by Jacope Pepe, “EAEU and Greater Eurasia: Mission Impossible?”, concludes Part III with an interesting analysis on Greater Eurasia – essentially a Russian idea of continental regional integration in Eurasia known as the Greater Eurasian Partnership (GEP). This idea has gained attention in political debates and expert circles over the past decade. The GEP envisions broad cooperation among countries across the Eurasian continent, including South, Southeast, and East Asia. So far, the GEP has failed to materialize beyond political rhetoric. The author explains why the GEP has not been successful and why its impact remains limited. This is indeed a big issue for the 2020s: on the one hand, such cooperation is all the more central to Russia and Belarus, as they see no other way than to reorient their trade and other economic connections away from Europe; on the other, Western sanctions increasingly and explicitly hinder these interactions. Part IV of the Companion is “Perspectives”. It consists of four chapters. Three of them are on the structural characteristics of the EAEU that define its present and will probably define its future to a large degree. These are authoritarian regionalism, power asymmetry, and sanctions. In Chapter 14 by Alessandra Russo, “EAEU and Authoritarian Regionalism”, addresses the issue of authoritarian regionalism, which might not only define what the EAEU essentially is, but also differentiates it from the EU. The Eurasian Economic Union is presumed to be composed of authoritarian states (this statement would be strongly contested by several EAEU member states). The author provides a complex assessment of the EAEU as a project that simultaneously aims at promoting the well-being of citizens and serves as a regime-boosting strategy for the autocratic elites. She challenges the Eurocentric interpretation that views post-Soviet regional integration as dysfunctional and suggests alternative ways to understand Eurasian regionalism more adequately. One perspective is overlapping regionalism, which emphasizes the multiple memberships of post-Soviet countries in various regional organizations, the strategic “pick and choose” approach adopted by these states, and the fragmentation of issues across multiple multilateral contexts. The second approach is regime-boosting regionalism, which depicts regional organizations as platforms for political solidarity and normative consonance among autocratic regimes: venues for leaders to demonstrate support and loyalty to one another, enhancing their status and formal sovereignty. The third perspective is protective integration, which highlights the role of regional organizations in safeguarding the stability and constitutional order of member states against pressures for regime change. Federico Salvati addresses another structural issue: power asymmetry within the EAEU in Chapter 15, “Power Asymmetries and Integration Process”. This feature of the EAEU is by no means unique in the “universe” of regional organization around the globe – just think of the South African Customs Union (SACU) and NAFTA and, to a lesser extent, MERCOSUR and the Gulf Cooperation Council (GCC). However, this structural characteristic does define the Union’s present and future, so it is worth looking at carefully. This is exactly what the author does, by looking at the political, legal, economic, and decision-making aspects of power asymmetry. Russia’s dominant position within the EAEU represents a significant power imbalance. As the hegemon of the region, Russia faces the task of creating a credible scenario for integration without exerting excessive influence or disregarding common regulations. The

8  The Elgar companion to the Eurasian Economic Union cautious approach by smaller EAEU members stems from their prioritization of stable trade relations with Russia, over a deeper political dimension. The author highlights the limitations of the EAEU stemming from Russia’s disproportional influence within the organization. Power asymmetries within the EAEU pose challenges to deeper integration efforts. While power imbalances alone may not hinder integration, when combined with the predominantly autocratic nature of the group and the past behaviour of its members, they complicate the process. The success of the EAEU currently relies heavily on Russia’s ability to provide concrete benefits to the smaller members. Yet another structural issue, the impact of Western sanctions and counter-sanctions on the EAEU, forms the subject of Alexander Libman’s contribution (“EAEU and Economic Sanctions”, Chapter 16). The impact of sanctions on economic regionalism is an almost entirely unexplored topic in comparative regionalism research, so this chapter is quite novel. The author reviews how the sanctions war between Russia and the EU/US affected the functioning of the EAEU in the last decade, since it has been a material issue since 2014. Libman derives a number of predictions about possible effects of sanctions on the EAEU, presents the empirical evidence, and highlights possible future scenarios for the EAEU based on the potential evolution of the sanctions regime. Philipp Schröder’s little gem of a contribution (Chapter 17, “‘Made in Kyrgyzstan’: An Ethnographic Exploration of ‘New Entrepreneurs’ Entering the Eurasian Economic Union”), is perhaps the most readable to people not inclined to theorizing, since it is a case study of how the Kyrgyz Republic’s accession to the EAEU in 2015 has affected its entrepreneurs. The author provides insights gathered from fieldwork conducted between 2013 and 2018, focusing on entrepreneurs in the manufacturing and agricultural sectors. The analysis aims to reveal how entrepreneurs adjusted to the EAEU’s policy harmonization and economic integration efforts. And adjust they did, as they went from simply importing goods to producing them, reoriented their exports, changed nomenclature, and sourced more capital from earlier unavailable sources. The chapter allows us to see in an engaging manner how the country’s accession to the regional economic union played out at the micro-level. Alexander Libman wraps up the Companion with his “Conclusion: Eurasian Economic Union at the Crossroads” (Chapter 18). This is a deep and extensive analytical summary of the scientific findings of the volume. It puts together a collection of building blocks, which can be used for thinking about the future of the EAEU and regionalism in post-Soviet Eurasia. It is very much worth reading: if you do not have time to read all 18 chapters, just read this one to find out the common hypotheses, observations, and understanding of trends that are at the centre of our Companion.

1.4

EAEU DATA

Before we proceed with the substantive chapters, we include some data on the EAEU and its five member countries (Tables 1.1 and 1.2). The dataset starts at 2014 – the year immediately preceding the establishment of the Union – as it will prove useful for dynamic comparisons. We provide data on population, nominal GDP, GDP per capita at purchasing power parity, mutual trade within the EAEU, the relationship of EAEU trade to total trade (one of the simplest indicators of the depth of integration), and the mobility of population (an important indicator, since it demonstrates the speed of not only economic but also social development).

Introduction  9 Table 1.1

Macroeconomic and social indicators of the EAEU, 2014–2021

Indicator

2014

2015

2016

2017

2018

2019

2020

2021

Population, mn

181.7

182.4

183.0

183.5

183.8

184.1

184.1

183.8

2,400.4

1,626.7

1,481.9

1,815.3

1,920.7

1,962.0

1,748.9

2,126.4

24.4

22.9

23.1

24.8

27.3

28.6

28.4

31.0

$), $ tn Mutual trade, $ bn

61.2

45.6

43.0

54.7

60.3

61.6

55.1

73.1

Share of mutual trade

9.9

10.9

12.2

12.4

10.9

11.8

13.1

12.2

4,684.9

4,153.4

4,148.7

4,420.6

4,646.4

4,939.6

2,432.9

3,127.0

GDP, $ bn GDP per capita, PPP (current international

in total exports, % Mobility of the population, pkm/ person

Sources: National agencies, World Bank, Eurasian Economic Commission, calculations of the authors.

Table 1.2

Macroeconomic and social indicators of the EAEU member states, 2014–2021

Indicator

2014

2015

2016

2017

2018

2019

2020

2021

Republic of Armenia Population, mn

3.0

3.0

3.0

3.0

3.0

3.0

3.0

3.0

GDP, $ bn

11.6

10.6

10.5

11.5

12.5

13.6

12.6

13.9

GDP per capita,

10.1

10.1

11.0

12.5

13.5

14.9

14.1

15.6

$ tn Exports to EAEU,

0.3

0.3

0.4

0.6

0.7

0.8

0.7

0.9

$ bn Share of exports

21.0

17.3

22.0

25.5

28.5

29.0

28.0

29.3

1,008.7

840.0

867.8

894.6

842.7

912.8

299.1

546.5

PPP (current international $),

to EAEU in total exports, % Mobility of the population, pkm/ person Republic of Belarus Population, mn

9.4

9.5

9.5

9.5

9.4

9.4

9.4

9.3

GDP, $ bn

78.5

55.3

47.5

54.7

60.0

64.5

60.8

69.7

GDP per capita,

19.0

18.1

17.8

18.4

19.4

20.1

20.3

21.7

$ tn Exports to EAEU,

16.2

11.0

11.4

13.7

13.9

14.6

14.0

17.4

$ bn Share of exports

44.8

41.3

48.4

46.7

41.1

44.2

48.0

43.6

2,655.7

2,542.1

2,536.4

2,627.1

2,728.8

2,927.3

1,976.8

2,241.4

PPP (current international $),

to EAEU in total exports, % Mobility of the population, pkm/ person

10  The Elgar companion to the Eurasian Economic Union Indicator

2014

2015

2016

2017

2018

2019

2020

2021

Republic of Kazakhstan Population, mn 17.3

17.5

17.8

18.0

18.3

18.5

18.8

19.0

GDP, $ bn

221.4

184.4

137.3

166.8

179.3

181.7

171.1

197.1

GDP per capita,

24.7

23.2

23.8

24.9

26.2

27.5

26.8

28.7

$ tn Exports to EAEU,

7.2

5.1

3.9

5.3

6.0

6.4

5.7

7.8

$ bn Share of exports

9.0

11.1

10.7

10.8

9.9

11.0

11.9

12.9

14,807.7

14,478.4

14,842.7

15,125.6

15,401.5

15,962.1

5,773.4

5,621.5

Kyrgyz Republic Population, mn

5.8

6.0

6.1

6.2

6.3

6.5

6.6

6.7

GDP, $ bn

7.5

6.7

6.8

7.7

8.3

8.9

7.8

8.7

GDP per capita,

4.3

4.2

4.7

5.0

5.3

5.5

5.0

5.3

$ tn Exports to EAEU,

0.6

0.4

0.4

0.5

0.6

0.6

0.6

0.8

$ bn Share of exports

33.8

27.7

28.4

30.7

34.9

32.3

28.1

28.8

1,850.6

1,848.8

1,863.5

1,982.7

1,979.4

2,034.4

1,177.9

1,357.9

PPP (current international $),

to EAEU in total exports, % Mobility of the population, pkm/ person

PPP (current international $),

to EAEU in total exports, % Mobility of the population, pkm/ person Russian Federation Population, mn

146.1

146.4

146.7

146.8

146.8

146.8

146.5

145.9

2,081.4

1,369.7

1,279.8

1,574.5

1,660.7

1,693.3

1,496.5

1,837.0

25.8

24.1

24.1

25.9

28.8

30.1

29.9

33.0

$ tn Exports to EAEU,

36.9

28.8

26.8

34.7

39.0

39.2

34.1

46.2

$ bn Share of exports

7.4

8.4

9.3

9.6

8.6

9.2

10.1

9.3

3,807.2

3,182.1

3,117.1

3,395.6

3,622.7

3,887.4

2,133.9

2,992.2

GDP, $ bn GDP per capita, PPP (current international $),

to EAEU in total exports, % Mobility of the population, pkm/ person

Sources: National agencies, World Bank, Eurasian Economic Commission, calculations of the authors.

Introduction  11

REFERENCES Dragneva, R., & Wolczuk, K. (Eds.) (2013). Eurasian Economic Integration: Law, Policy and Politics. Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Dutkiewicz, P., & Sakwa, R. (Eds.) (2018). Eurasia on the Edge: Managing Complexity. Lanham, MD: Rowman & Littlefield. Hancock, K. J., & Libman, A. (2016). Eurasia. In T. A. Börzel & T. Risse (Eds.), The Oxford Handbook of Comparative Regionalism. Oxford: Oxford University Press, pp. 202–224. Lane, D. (Ed.) (2017). The Eurasian Project in Global Perspective. New York: Routledge. Libman, A., & Vinokurov, E. (2012). Holding-Together Regionalism: Twenty Years of Post-Soviet Integration. Basingstoke: Palgrave Macmillan. Mukhametdinov, M. (2020). The Eurasian Economic Union and Integration Theory. Cham: Palgrave Macmillan. Obydenkova, A. V., & Libman, A. (2019). Authoritarian Regionalism in the World of International Organizations: Global Perspective and the Eurasian Enigma. New York: Oxford University Press. Russo, A. (2018). Regions in Transition in the Former Soviet Area. Cham: Palgrave Macmillan. Vasilyeva, N. A., & Lagutina, M. L. (2016). The Russian Project of Eurasian Integration: Geopolitical Prospects. Lanham, MD: Rowman & Littlefield. Vinokurov, E. (2018). Introduction to the Eurasian Economic Union. Cham: Palgrave Macmillan. Vinokurov, E., & Libman, A. (2017). Re-Evaluating Regional Organizations: Behind the Smokescreen of Official Mandates. Cham: Palgrave Macmillan. Vymyatnina, Y., & Antonova, D. (2014). Creating a Eurasian Union: Economic Integration of the Former Soviet Republics. Basingstoke: Palgrave Macmillan.

PART I HISTORY AND IDEATIONAL FOUNDATIONS

2. What is Eurasia and Eurasianism? Dmitrii Kofanov and Yoshiko M. Herrera

2.1 INTRODUCTION What is Eurasia, and how does it relate to Eurasianism and Eurasian integration? In this chapter we suggest a basis for understanding “Eurasia” by discussing three meanings of the term:1 first, Eurasia as a descriptive geographic unit; second, Eurasia as a conceptual place, based on essentialist notions; and third, Eurasia as a geopolitical space subject to competition as well as possible conflict and cooperation.

2.2

EURASIA AS A DESCRIPTIVE GEOGRAPHIC AREA

A central task in defining Eurasia is to delineate which countries are part of the region. It might seem that descriptive, location-based criteria would not be that complicated, but the meaning of Eurasia, even from a geographic perspective, is surprisingly messy. We can think of Eurasia as the landmass combining Europe and Asia2 or alternatively as the lands between Europe and Asia, but what countries precisely are in Eurasia, as opposed to just Europe or Asia? If we focus on countries that are on the boundary between continents, Russia seems to fit easily. However, some countries that are seemingly on the boundary, namely Turkey, are excluded from common understandings of Eurasia, and some countries which are conventionally included in Eurasia are either much more in Europe (e.g. Latvia) or in Asia (e.g. Kyrgyzstan), and hence the criterion of a location between Europe and Asia doesn’t seem to be the only basis for inclusion in the geographic concept of Eurasia. Although the term Eurasia had been a geographic designation since ancient times, it took on political meaning in the twentieth century, and to comprehend conventional understandings of which countries today geographically constitute Eurasia, it seems that both political and geographic criteria are required.3 Under communism and during the Cold War, the term Eurasia was hardly used. Instead, the countries of the USSR and Eastern Europe were designated as a region primarily based on their status as communist countries, and they were referred to with various terms including “Soviet and Eastern Europe”, the “Warsaw Pact” countries, the “Eastern Bloc” or the just “communist” countries, all terms which reference political institutions as well as geography. However, other communist countries of East Asia (China, North

Our discussion builds on an earlier analysis of the “three concepts of Eurasia” in Vinokurov and Libman (2012a). 2 As an adjective, “Eurasian” first emerged in the nineteenth century as a designation for persons of mixed parentage, European and Asian (e.g. British and Indian), see Lee (2004). 3 Vinokurov (2013) suggests an economic delineation as well, i.e. economies can be divided into gas and oil producers, small economies which are labor suppliers, and countries with relatively high manufactured exports. 1

13

14  The Elgar companion to the Eurasian Economic Union Korea, Vietnam) were not considered part of the same geographic region, and therefore political criteria such as communism, or even post-communism, cannot be the exclusive criterion of the Eurasian regional designation. The post-1991 era yielded a lot of chaos in regional definitions, but also a renaissance of the term “Eurasia”. Some countries became part of “Europe” in conventional parlance as well as institutionally by joining the European Union (EU), e.g. Poland, or in East Germany’s case by rejoining the Federal Republic of Germany to create “Germany”. But others were left as “the former Soviet Union” (FSU), although that particular label was never satisfactory. FSU is a past-referent, and it is not quite right since some FSU countries are now considered formally part of Europe, namely the Baltic states (Estonia, Latvia, and Lithuania), all three of which are EU and North Atlantic Treaty Organization (NATO) members. Another sign of the changing geographic and conceptual meaning of Eurasia appeared in the renaming of academic institutions since the end of the Cold War. With the end of the USSR, academic centers which had used the term “Soviet”, “Russian”, or “Slavic” – terms that were based on political and linguistic criteria for regional inclusion – had to rename themselves. Hence “Eurasia” became a catch-all label that could include Russia as well as countries from Eastern Europe, Central Asia, and the Caucasus. For example, the Russian Research Center at Harvard became the Davis Center for Russian and Eurasian Studies, and the regional professional organization for those studying what had been Eastern Europe and the USSR became the Association for Slavic, East European, and Eurasian Studies (ASEEES).4 In addition, the Russian war on Ukraine has prompted another series of conversations on removing the term “Russia” from regional centers in order to re-center regional studies away from a primarily Russia focus. The broad definition of Eurasia aligns with the empirically-based concept of “Eurasian Integration” set forth by Vinokurov and Libman (2012a) where they analyze which countries interact with each other and how. They write, “we will refer to the emerging economic, political and social integration involving three poles – the FSU, Europe and East Asia – as Eurasian integration” (Vinokurov and Libman, 2012a, p. 11). In other words, instead of deciding in advance what is Eurasia, we can define the region, and which countries are part of it, by analyzing actual ties between states. Chris Hann argued that Eurasia is a “supracontinental unity” stretching from the United Kingdom to Japan and including North Africa (Hann, 2016, p. 2). Others rejected the catch-all Eurasia and proposed specific alternative concepts, such as “Central Eurasia” (Kotkin, 2007), “Northern and Central Eurasia” (Vinokurov and Libman, 2012b, p. 91), or “Inner Eurasia” (Christian, 1994). Yet, the most common geographic definition of Eurasia appears to be just the 15 states of the former Soviet Union (Hancock and Libman, 2016, p. 544): Gleason wrote, “‘Eurasia’ is merely a convenient way of referring to what had been Soviet territory” (Gleason,

An indication of status issues surrounding the use of the term “Eurasia” concerns the reluctance of some East Europeanists to accept the term Eurasia. Professor Bruce Grant, then President of the American Association for the Advancement of Slavic Studies (subsequently renamed ASEEES), devoted his presidential address in 2011 to addressing this issue of renaming the region and the professional association (Grant, 2011). He suggested that rather than shunning Eurasia as a term linked to a place of inferior status (vis-à-vis Europe), those looking down on the East should, like the infamous Sub-comandante Marcos, magnanimously embrace such linkages with their downtrodden comrades. 4

What is Eurasia and Eurasianism?  15 2010, p. 26). Hence the geographic definition has come back to a political criterion, albeit a more limited one, Soviet vs. communist countries more generally. We argue that, as a practical matter, in terms of capturing what many scholars are talking about when they use the term Eurasia, there are political and location-based criteria for Eurasia, but Eurasia is not actually just the former USSR states. Given that the Baltic states have already left the Soviet space, conceptually and institutionally, by joining both the EU and NATO, we argue that before 2022, Eurasia – as a geographic region – was best understood as including the 12 former Soviet states of Russia, Belarus, Ukraine, Moldova, Georgia, Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, and Turkmenistan, plus Mongolia.5 However, given that Ukraine, and also Moldova, being east of Ukraine, have accelerated their convergence with the EU and NATO and increased their chances of obtaining membership in these organizations in the post-war period, they will be to a larger extent associated with Europe like the Baltic states rather than considered part of Eurasia. In other words, in discussing Eurasia, although “FSU states” is used as a shorthand descriptor, in fact most scholars and commentators exclude the Baltic states, and will increasingly exclude Ukraine and Moldova after the Russian invasion of Ukraine in 2022. It is worth noting that although one might make a case for inclusion of both Turkey and Afghanistan in Eurasia, they are not typically included, perhaps because they are closer to the “Middle East” region politically and geographically. Hence, with this designation of 13 states (if we provisionally count Ukraine and Moldova, which are in the process of disassociating from the Eurasian space) we come to a descriptive geographical understanding that more closely aligns with the region that many scholars, politicians, and commentators mean when they speak of “Eurasia”.

2.3

EURASIA AS AN ESSENTIALIST SPACE

Classical Eurasianism, which emerged among Russian émigrés in Europe in the 1920s, pursued an essentialist approach to Eurasia, treating it as an actually existing and naturally arising geographic and cultural entity, predisposed towards political unification. Therefore, it is not coincidental that Eurasianist ideas, considered in this section, came to the fore after the collapse of the Russian and then Soviet Empires, that is, in times of an intensified political fragmentation of the Eurasian space, which raised the need for some kind of ordering, at least conceptually. Eurasianism has been described in many ways: as a geographical ideology, a conservative movement, a form of Russian nationalism, and a scholarly ideology (Bassin et al., 2015). These are different approaches to the same multi-faceted phenomenon, but some of them tend to highlight particular currents of Eurasianism. Drawing on Laruelle (2008), who analyzes Eurasianism as “a doctrine, that is, a systematic set of theoretical conceptions upheld as true and promoted primarily by intellectuals” (p. 9), we can outline some of its key features. First, it was a product of the disenchantment of some Russian intellectuals with Europe as a reaction

Mongolia, though not often mentioned explicitly, is like the 12 former Soviet states because it is still loosely part of the post-Soviet political sphere, and like the 12 former Soviet states is located neither firmly in East Asia, nor firmly in Europe. Its close ties to the Soviet Union had profound impact on its political and economic development. An authoritative Life in Transition Survey lists Mongolia among post-communist transition countries (EBRD, 2007). 5

16  The Elgar companion to the Eurasian Economic Union to the First World War and the ensuing collapse of the Russian Empire. They considered the “Romano-Germanic” Western civilization, parliamentary democracy and capitalism to be in deep decline, and were attracted to ideas of a “third way”, a “conservative revolution”, and nascent fascist movements (Laruelle, 2008, pp. 26, 30). These ideas led to the development of the concept of Eurasia as a geographic region, different from Europe and Asia, and united by its own cultural and political tradition, superior to the Western one. Classical Eurasianists combined metaphysical and religion-based thinking with an interdisciplinary scientific narrative, which derived the presumed cultural and political commonality of Eurasia from its geography. In order to prove the systemic unity of Eurasia, Pyotr Savitsky, one of the leading early Eurasianists, developed a pseudo-scientific discipline, named “structural geography” (struktural’naya geographiia), aimed to prove the existence of common bio-geographical, climatic, and linguistic traits distinguishing Eurasia from Europe (Laruelle, 2008, p. 33). According to Savitsky, the western boundary of Eurasia largely coincided with the former Russian Imperial borders (Savitsky, 1927), with the exception of Poland. At the same time, most Eurasianists believed that its Asian part referred to only “the Turkic-Mongolian world of the steppes”, that is, roughly speaking, Central Asia, and also Siberia (interestingly, according to Savitsky, the Russian Far East did not belong to the geographical Eurasia), thus excluding China, India, and other East, South, and Southeast Asian countries (Laruelle, 2017; Savitsky, 1927). In contrast, contemporary neo-Eurasianists, apparently impressed by the success of East Asian countries, look much more favorably on geopolitical alliances and cultural exchanges with at least some of them, sometimes even prioritizing these ties (Laruelle, 2017). Interestingly, whereas for classical Eurasianists, like Savitsky, the naturally determined space was crucial for the emergence of a common identity of Eurasian peoples, it played an auxiliary role for Lev Gumilev, a Soviet historian and probably the most well-known ideologue of Eurasianism, widely cited in its respectable official versions. In accordance with his essentialist theory of biologically deterministic “ethnogenesis”, he believed that the formation of a new ethnic group he called “etnos” was the result of an external event (a burst of space energy), although in the course of its development the “etnos” accommodated to the “landscape”, acquiring its national mentality (Gumilev, 1990). Similarly, neo-Eurasianists have abandoned sophisticated ideas of spatiality bearing the primordial essence of Eurasian inhabitants (Laruelle, 2015b). The steppe and Turkic nomads populating the area have been claimed by Eurasianists as an essential element of Eurasia. However, Eurasianists seemed to appreciate them primarily as a tool for “Russia’s realization of its own Easternness, which is simply a way of rejecting the West” (Laruelle, 2008, p. 41). The Mongols were deemed the “first unifiers of the Eurasian space”, which protected Russia from the hostile and inherently alien Catholic West and helped instill Orthodox religiosity shared by all social strata (Bassin et al., 2015). This way of thinking deals with the second important trait of Eurasianism: despite its ostensible appeal to all the peoples of Eurasia, it was a largely Russo-centric doctrine, which assigned the central role to the Russian Orthodox civilization and considered Russia’s territorial expansion within the Eurasian borders as “the natural expression of its identity” (Laruelle, 2008, p. 34, italics in original). In this sense, Eurasianism may be interpreted as a kind of messianic Great Russian nationalism, which is preoccupied with control over its neighbors and geopolitical expansion approximately to the borders of the former Soviet Union. The perception of references to

What is Eurasia and Eurasianism?  17 Eurasian unity and the promotion of integration as just thinly veiled manifestations of Russia’s hegemonism (e.g. Kaczmarski, 2017) or a desire to restore the Soviet Union, idealized by many classical Eurasianists (Bassin et al., 2015), haunts Russia-sponsored post-Soviet integration projects. Moreover, as Laruelle (2008) shows, this pattern is not unique: non-Russian neo-Eurasianist ideologies also tend to pursue narrow nationalist agendas. That said, classical Eurasianism and its subsequent incarnations are quite a peculiar version of Russian nationalism, downplaying the Slavic legacy of Kievan Rus’ in Russian history and stressing the role of nomadic peoples, in particular, the Mongol-Tatar invasion, in the building of Russian Imperial statehood and cultural synthesis (Savitsky, 1993 [1925]). Eurasianism departed from putting forth a strong opposition between Russians and minorities within the Russian state, which could be resolved only through assimilation, secession, or outmigration. For instance, that view is reflected in Sergey Trubetskoi’s ethnopluralist perspective, which repudiated Western-style nation-building because it was blind to the specifics of essentialized local cultures, and instead called for greater introspection and cultural self-awareness (Trubetskoi, 1921; also see Sakwa, 2017). These features of Eurasianism have incurred harsh criticism on the part of traditional Russian nationalists – for example, denunciations of Gumilev’s “Turkophilia” and his positive assessment of the Mongol-Tatar invasion in Soviet times (Laruelle, 2008; Bassin, 2015) and recent debates between Russian “Imperialists” and ethnonationalists, who advocate for a greater congruence between the inherently European Russian people and the Russian state (Torbakov, 2017). Generally speaking, contemporary Russian neo-Eurasianists have abandoned the Romantic enchantment with the East, Central Asian, and Mongolian cultures, characteristic of their predecessors (Laruelle, 2015b). At the same time, sympathies towards Turkic culture rendered parts of the Eurasianists’ legacy, especially Gumilev’s theories, usable for the development of non-Russian neo-Eurasianist ideologies, particularly prominent in Kazakhstan and such Russian regions as Tatarstan and Sakha-Yakutia (Laruelle, 2008). An appreciation of the Turkic heritage in Eurasia is typical for indigenous, non-Russian Eurasianisms. They reject Russian messianism, isolationism, and imperialism, as well as the exclusive status of Orthodox Christianity, and they use those elements of the Eurasianist legacy that can serve their own nationalist aspirations and justify their pivotal or locally hegemonic position. They also accentuate the essentialist view of ethnic groups (rather than the whole Eurasia) as coexisting, but not necessarily amalgamating. Eurasia hence can be seen more as an arena, bridge, or mediator between civilizations, or, as it is for some Turkish Eurasianists, a union of Turkic-speaking peoples. For example, neo-Eurasianists in Tatarstan are often more outward-looking, pragmatic and Europe-oriented; they refer to a secularist tradition of reformist Islam or “Euro-Islam” and defend ethnofederalism, which prevents their dissolution in the Russian state (Shnirel’man, 2017; Laruelle, 2008). Kazakh Eurasianism, which used to be promoted by Nursultan Nazarbaev, sees Kazakhstan as the centerpiece of Eurasia, combining both European and Asian cultural traits; it condemns Russian colonialism, stands up for the sovereignty of Kazakhstan, but at the same time is known for its proactive and pragmatic integrationist stance (Laruelle, 2008; Ancesci, 2017). In Turkey, the idea of Eurasia has been exploited by several geopolitical traditions, to a different extent based on pan-Turkic, neo-Ottomanist or anti-Western (and somewhat pro-Russian) ideas (Erşen, 2017). Finally, classical Eurasianism had a utopian political program, obviously influenced by Western European conservative nationalist and fascist thought, which envisaged the fusion

18  The Elgar companion to the Eurasian Economic Union of all the Eurasian peoples into one nation, constituting an organic union with an essentially totalitarian and autarkic state (Laruelle, 2008). The rejection of Western-style liberal democracy as incompatible with the Russian-Eurasian civilization is also typical for contemporary neo-Eurasianists. Even though Gumilev’s biologically deterministic views of “etnos” left little room for political agency, he also believed that the “primordial unity” of Eurasian peoples necessitated their political unity and lamented the dissolution of the Soviet Union (Bassin, 2015; Laruelle, 2008). These radical ideas of a politically united Eurasia opposed to the West echo the experiences of the Russian Empire and the Soviet Union, which was strikingly popular among many of early Eurasianists, and provide a tarnished background for the current, more modest, integration projects. An intriguing question is whether this range of Eurasianist theories bears any relationship to current politics, in particular, post-Soviet integration processes (as they developed before 2022). Ultimately, some of their key concepts (say, “Eurasia” itself, or Gumilev’s “passion” (passionarnost’) and “ethnogenesis”) have firmly entered both academic studies and common parlance in Russia and other post-Soviet countries, but at the expense of detachment from their intellectual roots and context. They have also arguably had a more subtle and pervasive influence on academic and public discourse in terms of the reification of “civilizations” and ethnic groups as immutable and culturally self-sustained entities, whose incompatibility entails international conflicts. They have also promoted anti-Western sentiment and spawned a plethora of related pseudo-scientific disciplines (e.g. Laruelle, 2008, p. 12).6 One can also mention the (often exaggerated) intellectual and political influence of some prominent Eurasianism proponents (Sedgwick, 2004). It is remarkable that official statements and publications may include general references to the civilizational unity of the Eurasian space, but only rarely any direct mentioning of Eurasianist theoreticians (either classical or neo-Eurasianist) and their work (Pozo, 2017; Laruelle, 2015a). In October 2011, Vladimir Putin, Aleksandr Lukashenko, and Nursultan Nazarbaev each published an article in the Russian newspaper Izvestiia, dedicated to the creation of a “Single Economic Space” and discussing further prospects of Eurasian integration (Putin, 2011; Lukashenko, 2011; Nazarbaev, 2011). Of the three, only Nazarbaev, who can claim credit for being the initiator and an original ideologue of the post-Soviet Eurasian integration, referred to Lev Gumilev, who developed the ideas of Russian emigrant Eurasianists and “conceptually substantiated the unity of geographical and cultural-historical ties of peoples of a large part of Northern and Central Eurasia” (Nazarbaev, 2011). However, in the same text he reiterates that integration is a voluntary undertaking, which should be driven by “economic interests, not abstract geopolitical ideas and slogans”. Such statements set limits to the practical application of the essentialist, civilizational concept of Eurasia in a way acceptable to all the parties involved: it can be invoked to promote integration processes by imagining Eurasia as a geographical and cultural entity, but it should not impede pragmatic economic and political considerations. A final note on essentialism concerns academic debates over the question of Eurasia, which have not only been about nomenclature. Some of the area studies debates of the 1990s asked whether institutions from other parts of the world were compatible with Eurasia (though this 6 In this way they could also contribute to the immense popularity of Huntington’s Clash of Civilizations (Huntington, 1996) in post-Soviet countries.

What is Eurasia and Eurasianism?  19 essentialism was a facet of all regions of the world, requiring their own specialists, not just Eurasia).7 Some academics turned this essentialism around, however, to argue that separating out the study of Eurasia would be a way to fight against Western-centric study (Hann, 2016). Much of the question of legacies, and the question of who is European, and whether Eastern Europe is intrinsically different from Eurasia, has the suggestion of some essential flaw emanating from Russia or somewhere in the East. Thus, a discernible essentialist slant appears in the scholarship of contemporary Eurasian politics, which confronts the stubborn persistence of authoritarianism and clientelism in the post-Soviet space. For example, Kopstein and Reilly (2000) suggest a “spatial-dependence hypothesis” and argue that literal distance from Vienna or Berlin explains variation in democratic outcomes among postcommunist states via the “spatial diffusion of influence, institutions, norms, and expectations”, all of which depend on a country’s “geographic position on the Eurasian landmass” (Kopstein and Reilly, 2000, p. 2). Similarly, in an important book on authoritarianism in Eurasia, Henry Hale (2014) explains the prevalence of “patronalism”, with its reproduction of strictly hierarchical, pyramid-like political power constructions, by referring to a millennium-long historical tradition resilient to any reform attempts.

2.4

EURASIA AS A GEOPOLITICAL SPACE FOR COOPERATION OR CONFLICT

In contrast to Eurasia as merely a set of current-day countries, or to Eurasia as an ideological space based on essentialist notions of a specific people and land, there is a constructivist notion of Eurasia as a space for shifting geopolitics, a place that can be claimed by great powers, but may also serve as a place for economic cooperation as well as strategic conquest. Following Vinokurov (2013), we might describe this approach to Eurasia as “pragmatic” because the region has a functional use, and initiatives in the region are driven by instrumental political or economic goals rather than stemming from essential features of the region or mere geography.8 Vinokurov and Libman explain that a constructivist version of a region is that “regions are merely ‘spaces defined as regions’, i.e., socially constructed and ‘imagined’ entities” and that a new region “is a battlefield of multiple concepts and ideas” (Vinokurov and Libman, 2012a, p. 12). They argue that Eurasia fits this constructivist conception and it would seem that the above discussion of different ideological conceptions of Eurasia, even among Eurasianists in the region, suggests that Eurasia is indeed a “battlefield” for ideas rather than a place in which a single coherent ideological conception reigns, as was the case during the Soviet Union. In addition, if we survey the recent Eurasian projects, we see that there are a variety of initiatives promoted (or opposed) by different states, in which the goals are often couched in terms of the economic benefits of cooperation, but grander political ambitions seem to always be in the background. Given that other chapters in the book discuss these initiatives in detail,9 we

For an example of the debate and competing accusations of essentialism see Bunce (1995) and Schmitter and Karl (1994). 8 This approach is to some extent what Nazarbaev was promoting in his 2011 article discussed above. 9 See in particular Chapters 11, 12, 13, and 14 in this Companion. 7

20  The Elgar companion to the Eurasian Economic Union will only briefly outline some in order to demonstrate the point that Eurasia as a backdrop for larger political and economic initiatives is a third way to understand the meaning of Eurasia. The concept of Eurasia started to acquire its political meaning at the turn of the twentieth century with the appearance of geopolitical theories, like that of Halford Mackinder, who contended that controlling the “Heartland”, the central part of the Eurasian continent, was crucial for global dominance (Mackinder, 1919). With the Russian revolution and the ascendance of communism and Soviet power in the region and globally, the idea of Western or Eastern powers making claims on the Eurasian space appeared implausible. However, the end of the USSR created an opening, politically, economically, and conceptually for a reconsideration of the social, political, and economic integration of the former Soviet space. The literal end of the Union of Soviet Socialist Republics presented the region with a question about what kind of connections between states would replace the USSR. The question of Eastern Europe and the end of the Warsaw Pact was relatively quickly addressed by the expansion of the European Union and the reunification of Germany, but what would follow the USSR was less clear. There were aspirations towards Europe, e.g. Gorbachev’s concept of a “common European home”, and a Eurasian alternative sprouted up in the form of the Eurasian Union/Customs Union and in the Commonwealth of Independent States, which included the 12 former Soviet states (minus the Baltic states). But, in what was an early indication of the conflict and competition over great power influence in the Eurasian space in the 1990s, the United States and the European Union pressured newly independent states to join the WTO rather than the Customs Union (Darden, 2009, pp. 57, 83). The pressure to join the WTO was largely couched in terms of economic liberalization, but Western opposition to the Customs Union was in effect weakening Russia’s influence in the region as well.10 In addition, the competition for states to join multilateral institutions based either in Europe or in Eurasia is illustrated most sharply in the case of Ukraine, where the government alternated between pro-Europe and pro-Russia factions following two post-independence revolutions. Ukraine, under a pro-Russian government, initially signed onto and ratified the Treaty on a Single Economic Space which also included Belarus, Kazakhstan, and Russia. But, following the Orange revolution in 2004, Ukraine’s participation stalled. Ukraine then pivoted to Europe and from 2007 to 2011 negotiated an “Association Agreement” with the EU which included a “Deep and Comprehensive Free Trade Area” (DCFTA).11 The return of the pro-Russian government of Viktor Yanukovych, however, led Ukraine to apply to participate in the Eurasian Economic Union (EAEU) in August 2013, and had it joined it would have been the second largest economy of EAEU member states. Russian President Vladimir Putin had previously made clear that he saw the Customs Union (and later the EAEU) as a rival to the EU, and that his goal was to have the 12 post-Soviet states (minus the Baltic states) as members.12 However, in the fall of 2013 when President Viktor Yanukovych, under Russian pressure, refused to sign the previously negotiated Association Agreement with the EU, it precipitated the Euromaidan protests and the Revolution of Dignity, leading not only to Yanukovych’s ouster, but the annexation of Crimea in 2014 by Russia and the war in Eastern Ukraine. The watershed Russian military invasion of Ukraine in 2022 turned it into a literal See also Chapter 10 in this Companion. See https://​ec​.europa​.eu/​trade/​policy/​countries​-and​-regions/​countries/​ukraine/​. 12 See https://​www​.theguardian​.com/​world/​shortcuts/​2014/​feb/​18/​brief​-primer​-vladimir​-putin​ -eurasian​-union​-trade. 10 11

What is Eurasia and Eurasianism?  21 battlefield between Ukrainians, Russians, and other external powers, including NATO and the EU, but also such Middle Eastern countries as Turkey (a NATO member) and Iran, with China and India paying close attention albeit from the sidelines. The war has cemented the pro-NATO and pro-European Union orientation of Ukraine and obliterated any prospects of its participation in multilateral economic institutions led by Russia, especially as the Russian ruling regime openly denies Ukrainian nationhood and statehood, and expands its sovereignty claims over Ukrainian territories. Ukraine is an extreme case of tension in the Eurasian space between its key players, but there are many others, involving members of EAEU and compromising the prospects of peaceful integration on any grounds. The recurrent escalations of conflict between Armenia and Azerbaijan (the latter assisted by Turkey), which ended up in the restoration of Azerbaijani control over Nagorno-Karabakh and the exodus of Armenians living there in September 2023, the January 2022 turmoil in Kazakhstan, which was followed by military intervention by Russia and other Collective Security Treaty Organization (CSTO) members,13 the border clashes between Kyrgyzstan and Tajikistan in 2022, and the growing tensions in Moldova, strongly reminiscent of the struggles for the geopolitical orientation of Ukraine, further complicate matters in the Eurasian space. The competition for influence by foreign powers remains unsettled. Ukraine has received massive aid from the United States and many European countries, and there seems to be emerging consensus on Ukraine joining the EU and NATO. Moldova is also in question because it has been considered a possible site for further Russian military action, which could provoke a supportive response from the US and European countries similar to what happened with Ukraine. However, apart from that, the US does not seem to have clear plans for gaining influence in the rest of the Eurasian region. Prior to February 2022, the US had mostly scaled back its involvement, distracted as it was by two decades of fighting wars in Iraq and Afghanistan, which actually required cooperation with Russia,14 and even its commitment to support Ukraine seemed questionable. At the same time, the dynamics and the outcome of the ongoing Russian war on Ukraine are of paramount importance for the ultimate fate of Russia and the integration projects it promotes. Russia still continues to maintain its own initiatives for a Eurasian Economic Union, and China pushes the Belt and Road initiative as a way to have influence in Central Asia and the Middle East.15 Overall, the two countries have been the primary instigators of Eurasian economic and security cooperation, although Russia’s policies can now simultaneously be seen as destabilizing and inviting other external countries or institutions to assume more decisive roles.

13 The resultant loss of authority and leadership status of Nursultan Nazarbaev, one of the key champions of Eurasian integration, is another ominous sign for the latter’s prospects. 14 For example, the Transit Center at Manas in Kyrgyzstan was a critical base for moving US troops in and out of Afghanistan from 2001 to 2014, and the US required cooperation with Russia to fly over Russia in order to access the base. 15 See Chapter 11 in this Companion.

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2.5

THE FUTURE OF “EURASIA”

The term “Eurasia” may continue to be used as an alternative label for the post-Soviet region or a larger set of countries situated in Europe and Asia; however, its future utilization for integration projects is shaky. The intensified geopolitical competition, reviving the Cold War-like, zero-sum approach to distribution of spheres of influence, is hardly conducive to depoliticization of integration initiatives in terms of their design, implementation, and perception. In addition, as an increasing number of scholars as well as publics adopt a postcolonial perspective on the region, the concept of Eurasia, projecting an aura of Russia-centered organic unity, might lose much of its appeal, even beyond Ukraine where it is now thoroughly rejected. The Russian invasion of Ukraine, accompanied by imperialist, nationalist, and at times genocidal rhetoric of Russian elites, further diluted the potential for peaceful and voluntary cooperation in the region. The Russian authorities seem set on establishing their influence by physical force, which makes their integrationist initiatives much less attractive to actual and potential participants, and causes further “securitization” of inter-country relationships in the region. As Libman (2022) argues, Russian elites have routinely combined their “regionalism discourse”, which entails calling “for the development and strengthening of regional integration projects in Eurasia” (p. 1579) with imperialist rhetoric that places claims on foreign territories in support of Russian speakers. Moreover, the regionalism discourse itself went beyond narrowly pragmatic aims and served to support the status of Russia as a “great power”. Libman argued that even at the rhetorical level Russia failed to “credibly commit to respecting the sovereignty of neighboring states” (2022, p. 1579), and this has only gotten much worse since 2022. Before the war, the idea of the Eurasian Union, envisaging political integration on top of the Eurasian Economic Union, could only invoke associations with Russia-centered Eurasianist ideologies and raise further suspicions and accusations about Russia’s intention to promote its geopolitical influence, restore the Soviet Union, and the like. The Russian authorities had attempted to mitigate these fears and formulate alternatives to Chinese initiatives by coming up with the idea of “Greater Eurasia”, transcending post-Soviet boundaries (Kaczmarski, 2017), but the current invasion has rendered these attempts meaningless. On the other hand, Russia’s poor military performance, international isolation, and economic decline under the burden of sanctions is likely to lead to a common reassessment of its overall capabilities and resources and shift the balance of power in the Eurasian region, enhancing the negotiating positions of other countries. The economies of Russia and Belarus, in contrast to other countries, suffered substantial drops in GDP since 2022 and have the worst future growth prospects (Vinokurov et al., 2022). Belarus, which has Russian troops stationed on its territory and is itself under sanctions after Alexander Lukashenko’s crackdown on opposition in the wake of the 2020 presidential elections might be most susceptible to the pressure of Russian authorities, but even in this case there seem to be limits to the latter’s influence. Emomali Rahmon, the president of Tajikistan, in his memorable rant during the “Central Asia – Russia” summit in October 2022, demanded from Russia greater attention to the individual needs of its partners in Central Asia.16

16 See https://​eurasianet​.org/​was​-tajik​-leaders​-rant​-at​-putin​-defiance​-or​-a​-plea​-for​-greater​ -dependence.

What is Eurasia and Eurasianism?  23 Although Russia-sponsored projects such as the EAEU and CSTO are becoming even less attractive as the war in Ukraine drags on, Russia is more likely to respond by trying to preserve and cultivate relationships with remaining allies and partners.17 Thus, the tendency towards further alienation of other post-Soviet countries from Russia can be at least temporarily countervailed by a limited deepening of cooperation and exchange in certain spheres, e.g. security, investment, trade, and migrant flows, even if on a bilateral basis. For instance, the countries of the Caucasus and Central Asia now have to manage some completely new issues pertaining to their relationships with Russia, like the inflows of hundreds of thousands of Russians fleeing the war-related authoritarian consolidation, repression, and the military mobilization. Under these circumstances, the focus on purely economic issues and downplaying of essentialist connotations, as has been preferred by Kazakhstan, the originator of the Eurasian Economic Union, and Belarus, might be the only way to keep the post-Soviet Eurasian integration plan afloat, as also suggested in Libman (2022). The EAEU with its bureaucratic structures is still in place, and it will be continuing its routine activities addressing economic problems which are to a considerable extent independent of political developments. The integration should ideally be driven by an outward-oriented thinking, rather than a desire to create a self-contained entity. For example, Vinokurov (2013) proposed a concept of “pragmatic integration”, which is focused on technocratic rather than ideational aspects, namely, the tasks of “economic modernization and increased global competitiveness” (p. 93), requiring regional cooperation. It can exploit and promote socio-cultural ties, but should be based on “open regionalism”, involving the West, East, and South of the Eurasian continent, rather than being Russia-dominated and confined to the post-Soviet space.18 Given the heavily intensified confrontation between Russia and Western countries, the openness preferred by other post-Soviet countries is not yet a realistic option for Russia. Even the attainment of more restrained and pragmatic goals is jeopardized by current trends in Eurasian integration processes, which had already been unfavorable in the pre-war period, as noted by Libman and Vinokurov (2021). On the one hand, recent years have seen a number of ambitious infrastructural projects, the most prominent of them being the Chinese Belt and Road Initiative, and trade facilitation measures, which increase connectivity between Eurasian countries. On the other hand, “none of the initiatives emphasizes the issue of common rules, norms, and standards on which the European model of regionalism was based” (Libman & Vinokurov, 2021, p. 110). It precludes further institutionalization of integration efforts because of its infeasibility or redundancy, and puts at the forefront “specific projects and initiatives” (Libman & Vinokurov, 2021, p. 113), primarily economic, which, however, may encounter difficulties with financing and exploitation, exacerbated by the COVID-19 pandemic and then the current military crisis. The sanctions imposed by the US and European countries on Russian state bodies, companies, and financial institutions have hit the architecture of economic cooperation between Russia and other Eurasian countries, creating additional obstacles to transborder flows of goods, services, and people.

See https://​carnegieendowment​.org/​politika/​88698. See also Chapter 18 in this Companion.

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2.6 CONCLUSION In this chapter we have tried to map out three meanings of Eurasia: as a political and geographic entity, as an essentialist conception, and as a geopolitical field. In fact, these meanings overlap in that the essentialist ideology can impact which geographic entities are included in the region as well as what aspirations seem feasible for external players, and hence these three conceptions are not meant to be mutually exclusive. Yet, they are not identical either, and are separated in pragmatic policy-making and academic research. Despite the sharply increased uncertainty and the humanitarian, political, and economic crises caused by the Russian invasion and war in Ukraine, not only is the multi-faceted concept of Eurasia still relevant, but even the Eurasian Economic Union, largely promoted by Russia, is still active and may continue playing a noticeable role in regional interactions, even though it will not be expanding, and the prospects of further integration within the current institutional confinements are uncertain. We hope that by thinking about the region from multiple perspectives the reader gains an understanding of how politics, geography, ideas, and power intersect to create particular meanings of Eurasia.

REFERENCES Ancesci, L. (2017). Kazakhstani neo-Eurasianism and Nazarbayev’s anti-imperial foreign policy. In M. Bassin & G. Pozo (Eds.), The Politics of Eurasianism: Identity, Popular Culture and Russia’s Foreign Policy. London: Rowman & Littlefield, pp. 283–300. Bassin, M. (2015). Narrating Kulikovo: Lev Gumilev, Russian nationalists, and the troubled emergence of neo-Eurasianism. In M. Bassin, S. Glebov, & M. Laruelle (Eds.), Between Europe and Asia: The Origins, Theories, and Legacies of Russian Eurasianism. Pittsburgh: University of Pittsburgh Press, pp. 165–186. Bassin, M., Glebov, S., & Laruelle, M. (2015). Introduction: What was Eurasianism and who made it? In M. Bassin, S. Glebov, & M. Laruelle (Eds.), Between Europe and Asia: The Origins, Theories, and Legacies of Russian Eurasianism. Pittsburgh: University of Pittsburgh Press, pp. 1–12. Bunce, V. (1995). Should transitologists be grounded? Slavic Review, 54(1), 111–127. Christian, D. (1994). Inner Eurasia as a unit of world history. Journal of World History, 5(2), 173–211. Darden, K. A. (2009). Economic Liberalism and Its Rivals: The Formation of International Institutions Among the Post-Soviet States. Cambridge: Cambridge University Press. Erşen, E. (2017). Geopolitical traditions in Turkey: Turkish Eurasianism. In M. Bassin & G. Pozo (Eds.), The Politics of Eurasianism: Identity, Popular Culture and Russia’s Foreign Policy. London: Rowman & Littlefield, pp. 263–282. European Bank for Reconstruction and Development (EBRD) (2007). Life in Transition: A Survey of People’s Experiences and Attitudes. London: EBRD. Gleason, A. (2010). Eurasia: What is it? Is it? Journal of Eurasian Studies, 1(1), 26–32. Grant, B. (2011). We are all Eurasian. Presidential Address to the 43rd Annual ASEEES Convention. Published in NewsNet. News of the Association for Slavic, East European, and Eurasian Studies (January 2012), 52(1), 1–6. Gumilev, L. N. (1990). Etnogenez i biosfera zemli. Leningrad: Gidrometeoizdat. Hale, H. E. (2014). Patronal Politics: Eurasian Regime Dynamics in Comparative Perspective. Cambridge: Cambridge University Press. Hancock, K. J., & Libman, A. (2016). Eurasia. In T. A. Börzel & T. Risse (Eds.), The Oxford Handbook of Comparative Regionalism. Oxford: Oxford University Press, pp. 202–224. Hann, C. (2016). A concept of Eurasia. Current Anthropology, 57(1), 1–27. Huntington, S. P. (1996). The Clash of Civilizations and the Remaking of World Order. New York: Simon & Schuster.

What is Eurasia and Eurasianism?  25 Kaczmarski, M. (2017). Non-Western visions of regionalism: China’s New Silk Road and Russia’s Eurasian Economic Union. International Affairs, 93(6), 1357–1376. Kopstein, J. S., & Reilly, D. A. (2000). Geographic diffusion and the transformation of the postcommunist world. World Politics, 53(1), 1–37. Kotkin, S. (2007). Mongol Commonwealth? Exchange and governance across the post-Mongol space. Kritika: Explorations in Russian and Eurasian History, 8(3), 487–531. Laruelle, M. (2008). Russian Eurasianism: An Ideology of Empire. Baltimore, MD: Johns Hopkins University Press. Laruelle, M. (2015a). Eurasia, Eurasianism, Eurasian Union: Terminological gaps and overlaps. PONARS Eurasia Policy Memo No. 366. Laruelle, M. (2015b). The paradoxical legacy of Eurasianism in contemporary Eurasia. In M. Bassin, S. Glebov, & M. Laruelle (Eds.), Between Europe and Asia: The Origins, Theories, and Legacies of Russian Eurasianism. Pittsburgh: University of Pittsburgh Press, pp. 187–193. Laruelle, M. (2017). When Eurasia looks east: Is Eurasianism Sinophile or Sinophobe? In M. Bassin & G. Pozo (Eds.), The Politics of Eurasianism: Identity, Popular Culture and Russia’s Foreign Policy. London: Rowman & Littlefield, pp. 145–160. Lee, V. (2004). Being Eurasian: Memories Across Racial Divides. Hong Kong: Hong Kong University Press. Libman, A. (2022). Does integration rhetoric help? Eurasian regionalism and the rhetorical dissonance of Russian elites. Europe-Asia Studies, 74(9), 1574–1595. Libman, A., & Vinokurov, E. (2021). One Eurasia or Many? Regional Interconnections and Connectivity Projects on the Eurasian Continent. Washington, DC: The George Washington University, Central Asia Program. Lukashenko, A. (2011). “O sud’bakh nashei integratsii” [About the fate of our integration]. Izvestiia, October 17. Mackinder, H. J. (1919). Democratic Ideals and Reality: A Study in the Politics of Reconstruction. New York: Henry Holt. Nazarbaev, N. (2011). “Evraziiskii Soyuz: ot idei k istorii budushchego” [Eurasian Union: From idea to the story of the future]. Izvestiia, October 17. Pozo, G. (2017). Eurasianism in Russian foreign policy: The case of the Eurasian Economic Union. In M. Bassin & G. Pozo (Eds.), The Politics of Eurasianism: Identity, Popular Culture and Russia’s Foreign Policy. London: Rowman & Littlefield, pp. 161–180. Putin, V. (2011). “Novyi integratsionnyi proekt dlia Evrazii – budushchee, kotoroe rozhdaetsia segodnia” [The new integration project for Eurasia: A future which is being born today]. Izvestiia, October 3. Sakwa, R. (2017). The age of Eurasia? In M. Bassin & G. Pozo (Eds.), The Politics of Eurasianism: Identity, Popular Culture and Russia’s Foreign Policy. London: Rowman & Littlefield, pp. 201–220. Savitsky, P. N. (1927). Geographicheskiie osobennosti Rossii. Berlin: Yevraziiskoye knigoizdatelstvo. Savitsky, P. N. (1993 [1925]). Yevraziistvo. In L. I. Novikova & I. N. Sizemskaya (Eds.), Rossiia mezhdu Evropoi i Aziyei: evraziiskii soblazn. Antologiia. Moscow: Nauka, pp. 100–101. Schmitter, P. C., & Karl, T. L. (1994). The conceptual travels of transitologists and consolidologists: How far to the East should they attempt to go? Slavic Review, 53(1), 173–185. Sedgwick, M. J. (2004). Against the Modern World: Traditionalism and the Secret Intellectual History of the Twentieth Century. Oxford: Oxford University Press. Shnirel’man, V. (2017). Useful Eurasianism, or how the Eurasian idea is viewed from Tatarstan. In M. Bassin & G. Pozo (Eds.), The Politics of Eurasianism: Identity, Popular Culture and Russia’s Foreign Policy. London: Rowman & Littlefield, pp. 223–242. Torbakov, I. (2017). Defining the “true” nationalism: Russian ethnic nationalists versus Eurasianists. In M. Bassin & G. Pozo (Eds.), The Politics of Eurasianism: Identity, Popular Culture and Russia’s Foreign Policy. London: Rowman & Littlefield, pp. 19–38. Trubetskoi, N. S. (1921). Ob istinnom i lozhnom natsionalizme. In L. I. Novikova & I. N. Sizemskaya (Eds.), Rossiia mezhdu Evropoi i Aziyei: evraziiskii soblazn. Antologiia. Moscow: Nauka, pp. 36–47. Vinokurov, E. (2013). Pragmatic Eurasianism: Prospects for Eurasian integration. Russia in Global Affairs, 11(4), 87–96. Vinokurov, E., Kuznetsov, A., Berdigulova, A., Fedorov, K., & Babajanyan, V. (2022). EDB Macroeconomic Outlook 2023. Moscow: Eurasian Development Bank.

26  The Elgar companion to the Eurasian Economic Union Vinokurov, E., & Libman, A. (2012a). Eurasian Integration: Challenges of Transcontinental Regionalism. Basingstoke: Palgrave Macmillan. Vinokurov, E., & Libman, A. (2012b). Eurasia and Eurasian integration: Beyond the post-Soviet borders. In E. Vinokurov (Ed.), Eurasian Integration Yearbook 2012. Moscow: Eurasian Development Bank.

3. From the Customs Union to the Eurasian Economic Union Richard Sakwa

3.1 INTRODUCTION The road to the Eurasian Economic Union (EAEU) was long and complex, with many false starts and dead-ends. The disintegration of the Soviet Union in December 1991 was predicated on the creation of some sort of alternative integrative organization to maintain economic, security, social and political bonds between at least the majority of the 15 former Soviet republics. The Commonwealth of Independent States (CIS) was created at the moment of Soviet disintegration as part of the Belavezha Accords of 8 December, but very soon its ambitious agenda of retaining Soviet-era ties, within the framework of a loose voluntary association, was disappointed. Although the CIS played an important role in the transition to the establishment of 15 post-Soviet sovereign states, the integrative dynamic was soon reversed. In fact, the first Ukrainian president, Leonid Kravchuk, considered it little more than an instrument for a ‘civilised divorce’ (Van Ham, 1994, p. 11). There were contrary voices, and in a speech that is considered the foundational inspiration for later integration efforts, President Nursultan Nazarbaev of Kazakhstan, addressing an audience in Moscow State University in 1994, outlined the need for some sort of Eurasian Union to provide the institutional framework for trade and economic contacts between Western Europe and the growing economies of Asia (Nazarbaev, 1994). Although the CIS adopted numerous regulations and agreements, the bulk were fulfilled only partially if at all (Sakwa and Webber, 1999). The tension between grandiose ambition and modest achievement characterizes later attempts at post-Soviet integration. However, by the end of the first decade of the twenty-first century, substantive integrative ambitions were finally fulfilled (Dutkiewicz and Sakwa, 2015). How this played out in practice is the subject of this chapter.

3.2

THE EURASIAN ECONOMIC COMMUNITY (EURASEC) AND CUSTOMS UNION

There were many false starts on the road towards Eurasian integration. An early version of a customs union was created in 1994 to ensure free trade between Russia, Kazakhstan, Belarus and Kyrgyzstan, with Tajikistan joining in January 1999, accompanied by attempts at deeper integration between Russia, Belarus and Kazakhstan. There was also a separate process from 1999 that brought Russia and Belarus together as a ‘union state’, but there was little institutional consolidation of this declared unity. On 26 February 1999 Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan signed a treaty to establish a Customs Union and Common Economic Space for the free movement of goods, capital, services and people. The ambition 27

28  The Elgar companion to the Eurasian Economic Union was analogous to that of the Single European Act signed in February 1986 for the European Community (from 1992 the European Union), but the post-Soviet version set no timetable for the creation of a single market and failed to establish effective instruments to achieve its goals. These shortcomings were addressed by the treaty signed in Astana, Kazakhstan, on 10 October 2000 by the same countries strengthening the existing Customs Union. At the Minsk summit in 2001 the Customs Union was formally transformed into the Eurasian Economic Community (EurAsEC). The goal was to establish a free trade and unified customs system and to coordinate relations with the World Trade Organization (WTO). A number of institutions were created to fulfil these ambitions, including an Interstate Council, its highest body, an Integration Committee, a Parliamentary Assembly, a EurAsEC Arbitration Court, together with a permanent secretariat to service the organization. A system of weighted votes was introduced, giving Russia a clear predominance. Ukraine and Moldova gained observer status in 2002. At the EurAsEC summit in January 2006 Uzbekistan joined the organization, underscoring the country’s geopolitical shift at the time towards Russia (following anti-regime unrest in Andijan that was violently suppressed) and the strengthening energy partnership between the two. In 2006 EurAsEC merged with the Central Asian Cooperation Organization, and thus became the pre-eminent integration project for the entire region.1 The six members of EurAsEC covered 94 per cent of CIS territory, 73 per cent of the population and 88 per cent of CIS GDP. Their mutual trade rose from $29 billion in 2001 to $94 billion in 2007 (Izvestiya, 2008, p. 5). However, in October 2008 Uzbekistan withdrew, and thereafter was reluctant to join Euro-Asian integration projects. Following the death of the long-time leader, Islam Karimov, in September 2016 the country gradually opened up and became more receptive to elements of functional coordination, if not full integration. After a slow start, the practical implementation of integration covering a large part of the Euro-Asian landmass moved with remarkable speed. An integrative dynamic was established, and EurAsEC provided a framework for more ambitious plans. In 2007 Russia, Belarus and Kazakhstan announced the plan to create a Customs Union (CU) within EurAsEC, and thereafter the CU developed an institutional and political identity that far surpassed any other post-Soviet integration project. The legal, regulatory and trade framework of the Customs Union meant that it became the Eurasian counterpart of the EU, and by the same token represented a challenge to the EU’s potential hegemony in Western Eurasia (Dragneva and Wolczuk, 2013). Various plans were devised to deepen the CU. On 25 January 2008 Russia, Belarus and Kazakhstan announced a deeper Eurasian Customs Union consisting of nine trade agreements covering tariffs, anti-dumping, statistics and taxation, with plans for the other three members of EurAsEC (Kyrgyzstan, Tajikistan and Uzbekistan, ad interim) to join as equal members by 2010 (Simonyan, 2008, p. 8). The ECU was formally launched on 1 January 2010 by Russia, Belarus and Kazakhstan to include a common market of goods, capital and labour, coordinated tax, monetary, fiscal and trade policies, as well as unified energy, transport and IT networks, and by July most technical barriers had been removed. A number of contentious issues remained unresolved, including the fundamental one – Russia’s disproportionate size. Moscow had a 40 per cent share in voting and financial rights in EurAsEC, Kazakhstan, Belarus and Kazakhstan 15 per cent each, while Kyrgyzstan and Tajikistan just 7.5 per cent. In 2009 the supranational executive



1

See also Chapter 12 of this Companion.

From the Customs Union to the Eurasian Economic Union  29 body, the Commission of the Customs Union, started work, and the EurAsEC Customs Code came into effect in July 2010. A year later customs controls on the borders between Russia, Belarus and Kazakhstan were removed. Goods from China to Europe could now travel across the whole length of Euro-Asia with just two customs posts, one on entry in Kazakhstan and one on exit in Belarus. The momentum towards integration now became self-sustaining and subsumed earlier tributaries. A Common Economic Space (CES) had been announced in February 2003, with Russia taking the lead in getting the relevant documents signed in September of that year. The CES united the more advanced economies of Russia, Ukraine, Belarus and Kazakhstan and reflected Russia’s turn away from the CIS to focus on smaller groups of like-minded states to devise more effective instruments of integration. The CES encompassed 94 per cent of the CIS’s GDP and 88 per cent of the trade flow (Vinokurov, 2007, pp. 32–33). The goal was to create a free trade zone to facilitate the free movement of goods, services, capital and labour, on the model of the EC’s Single European Act. In a sign of trouble to come and in keeping with its now customary anti-integrationist stance, Ukraine was ambivalent about the whole enterprise. Ukraine was considered a key member of any putative Eurasian economic community, and in this case agreed to participate. However, in the ratification process it added so many conditions that its commitment was highly qualified. Ukraine at the time was Russia’s third largest trade partner after Belarus and Germany, but despite close economic ties it was concerned that integration with the CES would jeopardize growing links with the EU. These fears had been there from the beginning but were amplified after the Orange Revolution of autumn 2004, which brought to power a more radical Europe-leaning administration headed by President Viktor Yushchenko. Plans to establish a supranational body had already been mooted at the Astana summit in September 2004, together with the adoption of 29 policy documents, but were resisted by Ukraine’s new leadership. Russia, Belarus and Kazakhstan by mid-2006 were ready to sign the documents creating the CES and hoped that in due course Ukraine would join. In the interim, however, Ukraine appeared ready to discuss membership in Kazakhstan’s idea of creating a Eurasian Economic Union, united by a single currency. However, it was already clear that Ukraine was unlikely actually to take the momentous step of joining any such organization. For Ukraine under Yushchenko, as it had ultimately been for his predecessors Leonid Kravchuk and Leonid Kuchma, EU membership was the central ambition. From 2007 it started negotiations on what was to become an Association Agreement (AA) with the EU, with a Deep and Comprehensive Free Trade Area (DCFTA) at its heart. Plans to take the CES further once again encountered Ukrainian ambivalence. In 2010 Yushchenko was replaced by Viktor Yanukovych, who was considered ‘pro-Russian’, although it would be more accurate to say that he was more self-interested. Although less viscerally committed to European integration than his predecessor, negotiations for the AA continued. On the other side, the CES came into effect on 1 January 2012. The CIS created an extremely porous (that is, one with numerous exemptions) free trade area (FTA) agreement encompassing Russia along with Armenia, Belarus, Moldova and Ukraine, allowing the duty-free movement of goods and non-discrimination of producers. The Eurasian Economic Commission (EAEC) took over from the Commission of the Eurasian Customs Union. All looked set for Eurasian economic integration, but the rival project was also intensifying. The EU launched its Eastern Partnership (EaP) in Prague in May 2009, signalling a renewed bid to extend its sphere of influence deep into the ‘new’ Eastern Europe and Western Eurasia by

30  The Elgar companion to the Eurasian Economic Union strengthening ties with Belarus, Moldova and Ukraine, and Armenia, Azerbaijan and Georgia. The EU was negotiating AAs not only with Ukraine but also Georgia and Moldova, with DCFTAs attached. The AAs also entailed a geopolitical reorientation, with commitments to align security with the Atlantic powers. The DCFTAs were far more than free trade agreement but included commitments to harmonize elements of domestic legislation with the acquis communautaire, the EU’s vast body of laws and rules. The scene was set for a momentous ‘clash of integrations’.2 Yanukovych submitted an application to become an observer in what would become the EAEU in August 2013, but he was also due to sign the AA with the EU at the Eastern Partnership summit in Vilnius in the last days of November. Moscow made clear its dissatisfaction, since the EAEU without Ukraine would be a much-diminished entity. Russia imposed a range of sanctions and other punitive measures, while its calls for some sort of tripartite agreement between the EU, Ukraine and Russia were rebuffed. Finally, on 21 November, after much pressure from Moscow and the offer of a $15bn loan, Yanukovych announced that he would suspend signing the AA. This provoked protests and a chain of events that led to his overthrow in February 2014. Russia’s intervention and annexation of Crimea in March provoked a conflict in the Donbass that ended in two so-called ‘people’s republics’ emerging as separate entities. Their recognition by Moscow as independent states in February 2022 was accompanied by the invasion of Ukraine, what Moscow called a ‘special military operation’. The original hope that the EAEU would act as the counterpart of the EU to create some sort of ‘Greater Europe’ from Lisbon to Vladivostok was conclusively abandoned as the EAEU henceforth focused on deepening ties with Central Asian and West Eurasian states. Projects for integration ended up dividing Europe.

3.3

THE EURASIAN ECONOMIC UNION (EAEU)

In a landmark article in October 2011, Putin (2011, p. 1) stressed the success of the Customs Union with Belarus and Kazakhstan, which was completed on 1 July 2011, and the imminent creation on 1 January 2012 of the CES with the three countries. He spoke in expansive terms of a future Eurasian Union comparable and compatible with the EU and based on similar principles of trade liberalization and regulatory convergence. After a period of intense bargaining against the background of the Ukraine crisis, the Astana Treaty was signed on 29 May 2014 detailing the shape of the new organization, the Eurasian Economic Union. The treaty runs to an astonishing 715 pages and established the EAEU as an international organization registered with the UN and the WTO (Treaty on the Eurasian Economic Union, 2014). The agreement systematized the arrangements of the Customs Union and the CES, including free movement of goods, capital and labour and harmonization of regulation in nineteen areas. The main innovation was the establishment of a common market for services, starting with less important areas and intended gradually to cover sectors like telecommunications, transportation and financial services. By the mid-2020s the EAEU planned to establish a common financial and banking regulatory and monitoring authority. However, the most ambitious proposals were postponed, notably the liberalization of markets in a number of sensitive goods, including



2

See also Chapter 10 of this Companion.

From the Customs Union to the Eurasian Economic Union  31 pharmaceuticals, and the creation of a common oil, gas and electricity market. It dropped plans for political cooperation, common citizenship, foreign policy, inter-parliamentary cooperation, passports and visas, common border protection, as well as the idea of creating a common customs authority. There was no provision for a common currency or common social policy and pension system (Furman and Libman, 2015). The EAEU formally came into existence on 1 January 2015, and EurAsEC ceased to exist on that day. The three core members of Belarus, Kazakhstan and Russia were joined by Armenia on 2 January and Kyrgyzstan on 12 August of that year. The EAEU is by far the most ambitious integration project in the Euro-Asian region. Its standards, norms and rules are embedded in an increasingly thick institutional context. The supranational component is much stronger than anything attempted earlier, although falling far short of comparable institutionalization in the EU. This is hardly surprising, since what became the EU has been on the path of integration since the early 1950s, and the EAEU in this form only since 2015. The EAEU is based on liberal economic principles and conforms to WTO rules, thus rendering it compatible with comparable regional economic organizations. The ultimate goal initially was to move towards the creation of a fully-fledged Eurasian Union (EaU), including a political component with its own acquis covering technical, labour, mobility and other norms that would, like the EU, facilitate economic governance throughout the region.3 The five member states of the EAEU cover three-quarters of the post-Soviet region with an area of 20.2 million square kilometres (7.8 m sq. miles), compared to the EU-27’s 4.5 m sq. km (1.7 m sq. miles). The EAEU encompasses a single market of 184.6 million people with a combined nominal GDP in 2020 of $1.7 trillion (per capita $6,000), but in purchasing power parity (PPP) terms it was $4.8 trillion (per capita $18,500), compared to the EU-27’s GDP of $15.2 trillion ($19.7 trillion in PPP terms). The EAEU’s working language is Russian. The EAEU inherited a number of CIS free trade agreements (FTAs) but has signed a number of its own, beginning with Vietnam in May 2015, with Serbia in June 2016 and with China and Iran in May 2018.4 These are non-preferential and thus fairly basic, yet they establish a dynamic of close ties that could potentially lead to greater economic integration. The accession of the two other members of EurAsEC, Tajikistan and Uzbekistan, has been much anticipated, but domestic and external political factors have repeatedly delayed the process. The five full members are flanked by three states with observer status: Moldova from April 2017 and Cuba and Uzbekistan from December 2020. Karimov’s successor, Shavkat Mirziyoyev, has significantly opened up the country, and there is much speculation that Uzbekistan could join as a full member. As the largest and most powerful state in Central Asia, Uzbek membership would in part compensate for Ukraine’s absence. It would give the EAEU more of an Asian character, but as part of a fast-growing economic region it would provide a new impetus for development. Facing a barrage of Western sanctions, Iran in particular sought to deepen its institutional relationship with the EAEU, something that Russia, facing unprecedented sanctions of its own after the start of its military operation in Ukraine, also needed. There were even attempts to normalize relations with Afghanistan, once again under Taliban control after the American retreat in August 2021, as the transport and energy gateway to South Asia.

3 4



See also Chapters 4 and 5 of this Companion. See also Chapter 13 of this Companion.

32  The Elgar companion to the Eurasian Economic Union In organizational terms, the EAEU’s top intergovernmental body is the Supreme Eurasian Economic Council, consisting of the five heads of state, which meets on a regular basis to set the budget, agree the strategic perspectives for the organization and to reconcile major policy differences. At the next level there is the Eurasian Intergovernmental Council, composed of the heads of government, with the vice premiers usually attending. The executive body of the union is the Eurasian Economic Commission, established on 1 January 2012 and acting as the counterpart of the EU’s European Commission, although so far without the latter’s expansive ambitions. The Commission consists of two main bodies, the Council, the main body consisting of the deputy heads of government, and the Collegium, comprising ministers delegated from member states who are enjoined to act in a non-political manner. The Commission oversees the work of all subordinate branches and divisions, and its staff and functions greatly expanded after January 2015. The Commission takes the lead in managing customs policy and oversees broader macroeconomic issues, competition policy, energy coordination, and fiscal policy and anti-corruption strategies. All the bodies take decisions on the basis of consensus, thus enshrining the principle of formal equality.5 The executive body of the Commission is the Board, consisting of ten commissioners, two apiece delegated from the five member states for four-year terms. The Board is responsible for the day-to-day running of the EAEU, managing the budget, ensuring the fulfilment of treaties, resolving disputes and ensuring operational efficiency. As in the EU, there is a judicial body, the Court of the EAEU, which replaced the EurAsEC Court in 2015. It is made up of ten judges, two from each of the member states appointed for nine-year terms. The Commission is based in Moscow and the Court in Minsk. The Inter-Parliamentary Assembly of the CIS continues to meet, but there is no Eurasian Parliament (either directly elected or indirectly delegated). The idea has been much touted but its establishment is considered premature. After all, over two decades passed between the establishment of the EEC and the first meeting of the European Parliament in 1979. The EAEU could hardly have been launched in less propitious circumstances, with Russia entering a period of recession as a result of the drop in oil prices and the imposition of the first round of Ukraine-related sanctions in 2014. While labour mobility has been greatly facilitated, and trade in goods and services eased, various meat and dairy and other conflicts with Belarus up to 2020 indicated that it would be an uphill struggle to establish a fully-functioning single market. As the regional economic crisis continued, intra-EAEU trade fell as a proportion of total trade, and in 2018 represented only 13.5 per cent of turnover. Members inherited a visa-free regime (with some restrictions) from EurAsEC and this remains in place, but further integration stalled. The other members were unwilling to come into confrontation with the West in the same manner as Russia and refused to follow Moscow’s lead on Ukraine. None recognized the independence of Abkhazia and South Ossetia, which Moscow had on 26 August 2088, and from 2022 (with the exception of Belarus) refused to become entangled in the Ukraine war. It was one thing to establish the EAEU, but another to make to work. It had been created largely through bilateral deals between Russia and the member states, but once up and running Russia was hesitant to be constrained by the institution that it had created while the other member states jealously guarded their recently won sovereignty (Dragneva and Wolczuk,



5

See also Chapter 9 of this Companion.

From the Customs Union to the Eurasian Economic Union  33 2017). As the war in Ukraine turned into a proxy war between Russia and the West, the future of the EAEU looked increasingly parlous.

3.4

REGIONAL INTEGRATION IN CONTEXT

Although in formal terms a union of equals, Russia’s overwhelming predominance and increasing political alienation from the West alarmed elites in member states, unwilling to expose themselves to the disciplinary regime (including sanctions) imposed on Russia.6 The increasingly powerful macro-regional projects in the East and the West threatened to overwhelm the rather modest steps towards Eurasian integration. Nevertheless, at least three factors sustain Eurasian integration. First, the historical legacy of close human, economic and political contacts. Kyrgyzstan and Armenia in particular benefit from the integrated labour market, with their migrant workers enjoying easy access to documentation and services as a result of the EAEU. Remittances from Russia continue to make up a large part of their GDP. Second, although security is the prerogative of the Collective Security Treaty Organization (CSTO), with membership comprising all EAEU member states plus Tajikistan, security concerns nevertheless leak into EAEU development. CSTO forces (mostly Russian) were deployed for the first time in January 2022 to quell disturbances in Kazakhstan, which had been provoked by intra-elite conflict (Duvanovo and Junisbai, 2022). Moscow’s prompt use of the multilateral agency in support of the incumbent regime in Kazakhstan demonstrated the political value of regional integration. Earlier, Armenia had been strong-armed into joining the EAEU in September 2013 when faced by pressure from the guarantor of its security, Russia. Armenia’s participation confirms its status as a part of the Russian-centred security community, whose value is derived from the endemic conflict with Azerbaijan. The third element is geopolitics and geoeconomics, with the EAEU aspiring to fill the integrational vacuum between the expanding Atlantic alliance system to the West and the dynamic Asian economies to the East (Diesen, 2017, 2021). Russia pushed to turn the EAEU into a more unified political and economic organization in response to what was perceived to be Western pressure against the bloc. In the first years the EAEU focused on developing its basic competencies and organizational coherence and combating the immediate effects of the economic recession and the intensifying Second Cold War. However, by 2021 there were clear signs that Moscow was intent on accelerating EAEU integration ahead of any possible enlargement. Proposals included reducing non-tariff trade barriers and greater policy coordination. On 1 July Putin signed a law to create a common EAEU electricity market, allowing businesses in the five member states to choose their energy suppliers. On the same day a unified search system known as Work without Borders came into commercial operation to facilitate the flow of labour across the bloc. Also on 1 July all new drugs in the EAEU were registered according to common rules (Mikovic, 2021). The Commission proposed a Single Eurasian Sky programme, with an integrated air traffic control system and coordinated flight routes across the region. These are all examples of functional integration, but political integration continued to lag, especially in comparison to what has



6

See also Chapter 15 of this Companion.

34  The Elgar companion to the Eurasian Economic Union been achieved in the EU. The spillover anticipated by neo-functionalist integration theory has so far been relatively limited. In strategic terms, Eurasian integration sought to fill the ‘missing middle’ between the Atlantic community and the dynamic economies of East Asia. Rather than the Euro-Asian states joining the EU-centred wider Europe and the Atlantic community individually, one of the driving motivations of Eurasian integration was to allow its member states to bargain as a bloc. Taking advantage of their traditional ties, their bargaining power would thereby be enhanced, or so the partisans of Eurasian integration argued (notably Putin in his October 2011 article). However, many of the states in the region saw no need for such an intermediary body, which smacked to them of a new iteration of Russia’s empire-building tradition. The Baltic states are now firmly part of the Atlantic power system, members of the EU and NATO, which provide guarantees for their security and sovereignty. On joining the EAEU Kyrgyzstan lost its unique entrepôt status between China and Central Asia and the larger markets beyond, but it has now become one of the main destinations for Chinese infrastructural investment in the region. Uzbekistan traditionally acted as the Ukraine of the East, only reluctantly participating in Russian-driven integration projects. Under the leadership of Mirziyoyev this began to change, in part because the Ukrainian experience demonstrated certain hard geopolitical realities. However, the regional lessons to be drawn remain ambiguous. The five Central Asia states have become frontline states, with a traditional economic and humanitarian orientation towards Russia but with China a powerful rising force in the East. However, with Sino-Russian relations at an unprecedentedly high level, potential conflicts are managed and the two states ensure to respect the interests of the other in the region. The scope for playing one off against the other is relatively limited, and to date Central Asia has managed to avoid the harsh conflictual dynamic in evidence in the western part of the region. Russian hegemony is both a blessing and a curse, forcing the regional states to steer a difficult path between integration and the diversification of foreign policy and economic relations. In new Eastern Europe the situation is very different. All six (Belarus, Moldova and Ukraine, and the three South Caucasus republics of Armenia, Azerbaijan and Georgia) signed up to the EU’s Eastern Partnership, although with various degrees of engagement. All have become frontline states, part of the ‘contested neighbourhood’ with the EU. This has turned the very idea of integration into a source of division, whereas in theory it is intended to promote cooperation and reconciliation. Projects with the former ‘imperial’ centre in Moscow were particularly controversial. This prompted ‘hedging’ behaviour to avoid subordination by establishing links with external powers (Slobodchikoff, 2014). Only Belarus engaged in ‘balancing’ behaviour by joining with Russia to counter the Western powers, and even that was a result of the weak political position of the Alexander Lukashenko regime following the mass protests against the fraudulent presidential election of August 2020. The South Caucasus is torn by internal divisions and located in a neighbourhood that has traditionally been contested by powerful neighbouring empires. Buoyed by energy rents, Azerbaijan has been able to sustain an independent position, signing an individual package with the EU while maintaining good relations with Russia (Van Gils, 2020). Armenia was traditionally dependent on Russia for its security. Georgia is torn by the secessionism of Abkhazia and South Ossetia. For the most part it maintains a strong pro-Western orientation, but the Georgian Dream governments after 2012 established a more balanced relationship with Russia. The divisive dynamic has

From the Customs Union to the Eurasian Economic Union  35 been at its most intense in Ukraine and has characterized its state building from the beginning (D’Anieri, 2019). The challenges are similar throughout Eurasia. The struggle for sovereign autonomy is accompanied by an integrative dynamic with former partners and engagement with external actors. However, the character of external engagement is very different. The EU and the EAEU are at very different levels and effectively competed in the same market, whereas China offers a very different package of political and economic goods. For China the focus is on bilateral trade and investment and avoids institutional consolidation. This is network connectivity reminiscent of David Mitrany’s functional vision of integration, rather than the exclusive territorial form pursued by the EU and the EAEU (Mitrany, 1966). Most regional states have signed up to China’s Belt and Road Initiative (BRI), offering infrastructural investment and other forms of engagement. China studiously avoids what it calls interference in the domestic affairs of partner states, and certainly eschews Atlantic-style regulatory and normative transformation. Russia remains the major hegemonic force and thus imbues Eurasian integration with a dynamic all its own (Krickovic and Bratersky, 2016). At its best, hegemony works through the power of attraction and ‘soft power’, and while this is not absent in Russia’s relations with its neighbours, a coercive element has also been in play.7 The mainstream Western view that Eurasian integration is little more than a project for the restoration of some sort of ‘greater Russia’ in the guise of a multilateral regional organization is challenged by those who argue that it is valuable as a forum for regional engagement and development. Nevertheless, plans for deeper integration are resisted by member states. Russia itself is ambivalent about the value of the EAEU, since like any great power it fears being constrained by the multilateral format. It is significant that when agreeing the deal to ‘harmonize’ (sopryazhenie) the work of the EAEU and BRI in 2015, Russia took the lead and failed to effectively consult with its partners. The reality of the EAEU is that of a complex set of relationships in a regional environment challenged by threats from all sides, while the dynamic towards greater integration is countered by the continuing struggle for post-Soviet state sovereignty. States that had for so long been part of a multinational empire are still shaping their identities as independent states.

3.5

IS THE EAEU NECESSARY?

In his article Putin (2011) argued that the EAEU would develop on principles similar to those of the EU. He insisted that the intention was not to ‘fence ourselves off from anyone’, but that Eurasian integration would develop according to ‘universal integrative principles as an inalienable part of Greater Europe, united by mutual values of freedom, democracy and market rules’. Nevertheless, there remains a strong current critical of the whole idea. This was expressed most forcefully by then US Secretary of State Hillary Clinton (2012), who argued that the whole exercise was designed to restore Russian imperial power and to re-Sovietize the region. This was far-fetched, yet Russia’s size and predominance inevitably entails an element of hegemonic if not neo-imperial primacy, despite attempts to create institutional mechanisms

7



See Chapter 11 of this Companion.

36  The Elgar companion to the Eurasian Economic Union that embed decisional equality. Here we will examine some of the main arguments for and against the whole enterprise. First, arguments in favour advance the core argument that regional economic blocs reduce transaction costs between economic neighbours (Lane and Samokhvalov, 2015). The Eurasian single market advances the classic agenda of the ‘four freedoms’: the free movement of people, goods, capital and services. A common market allows trade to increase to maximize the economic and labour opportunities for all, following ‘gravity’ models of rational flows. If such bodies could be established in Western Europe (the EU), Latin America (Mercosur/ Mercosul) in 1991, North America (NAFTA, 1991, and its successor body USMCA – US, Mexico, Canada), Economic Community of West African States (Ecowas, 1975) and others, then why not in Eurasia? It would reduce transaction costs, encourage infrastructure investment across the region, coordinate energy policies and networks, and regulate competition between the member states. However, the question remains: why create an alternative body when there was already the EU to act as the motor of integration, with a long track record of achievement? By sponsoring the creation of the EAEU, Russia challenged the position of Brussels as the pre-eminent integration project. It effectively meant decentring the EU, which was an obvious challenge and generated a logic of conflict between competing projects. This affected Ukraine in particular, and the result was catastrophic. However, it is not clear why the EU should assert an integration monopoly in regions far from its core membership. The EU continued to advance its pre-eminence and refused to establish developed coordination mechanisms with the EAEU. The reluctance is understandable, although the claim that the EAEU is not much more than a Russian hegemonic project beset by poor governance and the lax application of regulatory standards is not entirely fair. The boycott only reinforced the military division of the continent between NATO members and the CSTO (which also do not maintain organizational contacts). The Atlantic powers now face Eurasia in a re-run of the old Cold War East–West confrontation. Second, the EAEU is in danger of assuming the character of an alliance of authoritarian states.8 This was apparent in the intensifying crisis in Belarus following the flawed presidential election of August 2020, when Lukashenko sought to extend his rule allegedly by falsifying the election result. In the end Russia moved to support Lukashenko, despite his brutal suppression of the protest movement. The opposition insisted that their goal was democracy and not to upset the geopolitical balance in Europe. Moscow exploited Minsk’s vulnerability by pushing forward a package of bilateral integrative measures to deepen the ‘union state’, although Belarus continued to stall all the way up to the beginning of the Ukraine war. Belarus, like all Eurasian states, jealously guards its sovereignty and independence. However, it allowed Russia to use its territory as a base for one of the prongs of the attack on Ukraine, and thereafter was deeply implicated in the war, and was imposed with many of the same draconian sanctions as Russia. This is not directly a matter affecting EAEU institutional development, although inevitably it shapes the context of Eurasian integration. Third, on the other side, China’s BRI provides a more functionalist approach to integration, based not on what some would regard an outmoded and exclusive institutional model but instead based on flexible network relations. China’s president, Xi Jinping, announced the creation of a Silk Road Economic Belt on 7 September 2013 in a speech at the Nazarbaev



8

See Chapter 14 of this Companion.

From the Customs Union to the Eurasian Economic Union  37 University in Astana, joined later by a Maritime Silk Road and many others, which together are now known simply as Belt and Road. The Belt and Road is an ambitious attempt to promote regional cooperation, economic integration and communication and transport networks, while the accompanying maritime belt funds upgrades to ports and transport hubs (Cooley, 2015). Over 160 states have now signed up through Memorandums of Understanding. A Joint Statement signed on 8 May 2015 in Moscow between Putin and Xi established the framework for ‘cooperation and conjugation’ between BRI and the EAEU (Lukin, 2015). Later agreements and working commissions put flesh on the bones of this ‘conjugation’ (sopryazhenie), and various intergovernmental commissions continue to deepen inter-regional cooperation mechanisms. The EAEU operates a common external tariff, much to the dissatisfaction of Beijing, but conjugation ensures that the issue is managed on a cooperative basis. In fact, as Russia divorced from the West, it became more deeply integrated into Asian markets, along with the EAEU. Two models of integration – one based on classic territorial organizational principles and the other on functional project-based cooperation – are becoming increasingly interconnected. There are still points of tension, but as long as the overarching relations between Moscow and Beijing remain good, the cooperative spirit will endure. Fourth, although the creation of the EAEU provoked competition between integrations, the declared goal was the opposite. Considered by many in the West as an attempt to institutionalize Russian predominance in the post-Soviet space, the EAEU was initially part of Russia’s long-term commitment to the Greater European idea. This is why the EAEU is based on similar free trade and liberal economic principles as those of the EU. It was intended to serve as one of the institutional pillars of ‘greater Europe’, the latest manifestation of Gaullist-Mitterrandist aspirations for a plural Europe united from Lisbon to Vladivostok, an idea that was taken up and amplified by Mikhail Gorbachev in his idea of the Common European Home. Greater Europe seeks to find ways to overcome the logic of conflict that inevitably arises from geopolitics (Klinke, 2012). The greater European project sought to overcome the division of the continent through free trade, visa-free travel and the assertion of a multipolar but united continent in world affairs (Gromyko, 2014). However, by displacing the centrality of Brussels and giving equal weight to the East it inevitably provoked resistance. The EAEU project attempted to give institutional form to Gorbachev’s Common European Home while implementing his aspirations for geopolitical and ideological diversity on the Euro-Asian continent. As the spirit of amity fostered by the end of Cold War I waned, so the aspiration for the creation of some sort of pan-continental community also died. Atlanticism at one end of the continent is now balanced by the creation of some sort of Asian-centred Greater Eurasian Partnership. Fifth, Russia’s pre-eminence inevitably generates asymmetries, despite the attempts to balance Russian power through parity voting in the EAEU Commission. Nevertheless, Russia sets the pace for most EAEU initiatives, and has been hesitant about extending Soviet-style patterns of subsidizing its neighbours. This was evident, for example, in May 2020 when Putin announced that there would be no uniform gas price for EAEU states, to the disappointment of Armenia and Belarus, both highly dependent on Russian energy resources. Kazakhstan at the time was critical of Moscow-led development strategies, demonstrating how bumpy the road to integration would be. The problem of asymmetry is compounded by the very different levels of economic development, with Kyrgyzstan one of the poorest countries in Central Asia, while Russia and Kazakhstan have benefited from energy exports to fuel their economic development. Russia has diversified its economy, but some 15 per cent of GDP is still generated by the sector. Belarus remained dependent on Russia for cheap oil supplies, which it refined and then

38  The Elgar companion to the Eurasian Economic Union gained the value in sales to Western Europe, a pattern disrupted after the imposition of sanctions in 2021. Armenia’s security dependence on Russia was reinforced after its defeat in the Second Karabakh War in 2020, in which Azerbaijan retook the seven provinces lost in the first war of 1992–94, as well as part of Nagorno-Karabakh proper. In September 2023 Azerbaijan occupied the entirety of the region, forcing the Armenian population of Nagorno-Karabakh to flee. The addition of Uzbekistan would even out some of the asymmetries. With a population of 35 million and a relatively large and dynamic economy, the country is the regional security leader. In December 2020 Uzbekistan was granted observer status in the EAEU. Finally, liberals within Russia historically questioned the economic rationale of regional institutional integration when global markets beckoned and the communications and transport revolution was shrinking the world. In the age of globalization, who needs regional integration? This argument is advanced by supporters of Brexit, a view which ultimately prevailed in the UK voting to leave the EU in 2016. The major challenges facing the EU itself also fostered arguments against deep regional integration. The war of 2022 led to the consolidation of the EU and its deeper integration into the Atlantic security community and NATO, while on the other side the EAEU was faced with deep uncertainty. Its fate was even more closely tied to that of Russia, and Russia’s future would be shaped by the course of the conflict with the West.

3.6 CONCLUSION Critics consider the EAEU deficient in certain respects, and hence it has struggled to be accepted as a legitimate international organization. Although registered by the United Nations, the EAEU has fallen victim to its birth in conditions of renewed Cold War. It remains trapped between the powerful attractive power of the EU to the West, and the financial and economic muscle-power of China’s Belt and Road to the East. There is also the alienating factor generated by the ‘post-imperial’ context in which the organization was established. Its members are still engaged in the ‘primitive accumulation of sovereignty’ phase of state and nation building. Not surprisingly, despite historic political, economic and cultural links, they are reluctant to give up the prerogatives so recently gained. They fear that the benign language of integration could provide the gateway for Russia to restore hegemony, if not empire. In conditions of intense geopolitical competition between Russia and the West, they fear contagion and penalties. Nevertheless, the EAEU has gained in substance and organizational coherence since its establishment in 2015. In the most difficult of circumstances, including a deep economic recession, geopolitical conflict and a heavy burden of the past, the EAEU has survived, built up links with the Belt and Road, and helped fill the integrative vacuum in the Eurasian heartland. In the context, this is no small achievement.

REFERENCES Clinton, H. (2012). ‘Clinton calls Eurasian integration an effort to re-Sovietize’. RFE/RL, Russia Report, 9 December. Cooley, A. (2015). New Silk Route or developmental cul-de-sac? PONARS Eurasia, PONARS Eurasian Policy Memo No. 372. D’Anieri, P. (2019). Ukraine and Russia: From Civilized Divorce to Uncivil War. Cambridge: Cambridge University Press.

From the Customs Union to the Eurasian Economic Union  39 Diesen, G. (2017). Russia’s Geoeconomic Strategy for a Greater Eurasia. London: Routledge. Diesen, G. (2021). Europe as the Western Peninsula of Greater Eurasia: Geoeconomic Regions in a Multipolar World. London: Rowman & Littlefield. Dragneva, R., & Wolczuk, K. (Eds.) (2013). Eurasian Economic Integration: Law, Policy and Politics. Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Dragneva, R., & Wolczuk, K. (2017). The Eurasian Economic Union: Deals, Rules and the Exercise of Power. Chatham House Research Paper. Dutkiewicz, P., & Sakwa, R. (Eds.) (2015). Eurasian Integration: The View from Within. London & New York: Routledge. Duvanovo, D., & Junisbai, B. (2022). Outsourcing violence: Provocateurs and power struggles in Kazakhstan, January 2022. PONARS Eurasia Policy Memo No. 780. Furman, E., & Libman A. (2015). Europeanization and the Eurasian Economic Union. In P. Dutkiewicz & R. Sakwa (Eds.), Eurasian Integration: The View from Within. London & New York: Routledge, pp. 173–192. Gromyko, A. (Ed.) (2014). Bol’shaya Evropa. Moscow: Institute of Europe. Izvestiya (2008). EvrAzES. Izvestiya, 31 January. Klinke, I. (2012). Postmodern geopolitics? The European Union eyes Russia. Europe-Asia Studies, 64(5), 929–947. Krickovic, A., & Bratersky, M. (2016). Benevolent hegemon, neighbourhood bully, or regional security provider: Russia’s efforts to promote regional integration after the 2013–2014 Ukraine crisis. Eurasian Geography and Economics, 57(2), 180–202. Lane, D., & Samokhvalov, V. (Eds.) (2015). The Eurasian Project and Europe. Basingstoke: Palgrave Macmillan. Lukin, A. (2015). Shanghai Cooperation Organization: Looking for a new role. Valdai Papers Special Issue. Mikovic, N. (2021). ‘Russia seeks to accelerate old Soviet State Union’. Asia Times, 6 July. https://​ asiatimes​.com/​2021/​07/​russia​-seeks​-to​-accelerate​-old​-soviet​-state​-union/​. Mitrany, D. (1966). A Working Peace System. Chicago: Quadrangle Books. Nazarbaev, N. (1994). Meeting with the staff and students of M. V. Lomonosov Moscow State University, 29 March. In N. Nazarbaev, Kazakhstani-Russian Relations. Moscow: Raritet. Putin, V. (2011). ‘Novyi integratsionnyi proekt dlya Evrazii: budushchee, kotoroe rozhdaetsya segodnya’. Izvestiya, 4 October. http://​premier​.gov​.ru/​events/​news/​16622. Sakwa, R., & Webber, M. (1999). The Commonwealth of Independent States, 1991–1998: Stagnation and survival. Europe-Asia Studies, 51(3), 379–415. Simonyan, Y. (2008). ‘Soyuz trekh’. Nezavisimaya gazeta, 28 January. Slobodchikoff, M. (2014). Building Hegemonic Order Russia’s Way: Rules, Stability and Predictability in the Post-Soviet Space. Lanham: Lexington Books. Treaty on the Eurasian Economic Union (2014). https://​www​.wto​.org/​english/​thewto​_e/​acc​_e/​kaz​_e/​ WTACCKAZ85​_LEG​_1​.pdf. Van Gils, E. (2020). Azerbaijan and the European Union. London and New York: Routledge. Van Ham, P. (1994). Ukraine, Russia and European security: Implications for Western policy. Chaillot Paper No. 13. Vinokurov, E. (2007). Russian approaches to integration in the post-Soviet space in the 2000s. In K. Malfliet, L. Verpoest, & E. Vinokurov (Eds.), The CIS, the EU and Russia. Basingstoke: Palgrave Macmillan, pp. 22–46.

PART II COMMON MARKETS AND INSTITUTIONS

4. Trade, Customs Union, and the EAEU Common External Tariff Alexander Knobel and Nikita Pyzhikov

4.1 INTRODUCTION More than ten years have passed since the foundation of the Customs Union of Belarus, Kazakhstan and Russia (2010). In 2015, the Customs Union transformed into the Eurasian Economic Union (EAEU). Armenia and Kyrgyzstan joined the EAEU in the same year. Customs union implies the elimination of barriers to mutual trade and the establishment of a common foreign trade policy. In other words, a single customs tariff is applied to goods from states that are not members of the grouping (they are subject to the same duties, regardless of from which country these goods enter the territory of the customs union). According to the traditional theory of economic integration customs union is one of the five types of economic integration followed by economic union (Balassa, 1965). Belarus, Kazakhstan and Russia have followed a similar route. The EAEU is envisioned to be an economic union, i.e., a deeper type of integration that emerged from the Customs Union. The economic union entails the achievement of the “four freedoms” in the territory of the union: free movement of goods, services, people and capital. This type of integration also implies a common economic, social (including industrial, agricultural, transport, energy) and monetary policy (introduction of a common currency). However, despite the depth of the integration processes embedded in the definition of economic union, the EAEU today can be characterized rather as an in-depth customs union with separate elements of a common market and an economic union. For example, the rates of import customs duties for certain goods in the EAEU member states vary, which is associated with the tariff schedule of the Union member states in the WTO and the application of compensatory measures in relation to certain external partners. This chapter examines the challenges of the functioning of the customs territory of the Eurasian Economic Union, in particular, the application of the Common External Tariff (CET) of the EAEU. First, we analyze the dynamics of mutual trade of EAEU countries, as well as trade with external partners, and assess the contribution of Eurasian integration to the growth of mutual trade of EAEU member states. In the second part we identify key challenges that hinder the operation of the single market within the EAEU. In the third part, we provide key conclusions and some recommendations for mitigating the identified problems.

4.2

KEY CONCEPTS

Economic integration has an impact on mutual and external trade flows, as well as on the reallocation of resources. Two types of effects of integration on national economies can be distinguished: trade creation effect and trade diversion effect (Viner, 1950). The trade creation 41

42  The Elgar companion to the Eurasian Economic Union effect arises from the interconnection of individual national markets into a single market, which allows economic agents to increase volumes and reduce unit costs of production, while increased competition pushes them in this process. The trade diversion effect is associated with the removal of trade barriers, making mutual imports of participating countries less expensive and displacing locally produced goods and goods from third countries, resulting in a change in the structure of trade. A customs union and deeper forms of integration have a greater impact on the welfare of the economies participating in this form of integration than from a free trade agreement (FTA), mainly through trade creation effects related to the common trade policy towards third countries (in particular, the common customs tariff) (Krueger, 1997). At the same time, if, for a developing country of the union, tariffs become higher for high-tech goods imported from developed countries, then the total factor productivity may decrease (Tarr, 2016). While not pretending to provide a complete overview of existing literature, we list a few key publications below, presenting them along the timestream of the development of the Customs Union (CU) and the EAEU. In 2010, Russia, Belarus and Kazakhstan formed the Eurasian Customs Union and imposed the Russian tariff as the CET of the Customs Union. Kazakhstan had to almost double its average external tariffs to implement the CET (Tarr, 2016). Estimates reveal that the tariff changes resulted in substantial transfers from Kazakhstan to Russia (World Bank, 2012). Importers in Kazakhstan had to purchase lower quality or higher priced Russian imports that are protected under the tariff umbrella of the CET. In 2015, Russia, Belarus and Kazakhstan formed the Eurasian Economic Union (EAEU) designed to create a single market, i.e., promote the free flow of goods, services, labor and capital. Progress towards achieving the single market has been mixed (Knobel et al., 2019). In 2015, Armenia and the Kyrgyz Republic joined and they also had to double their external tariffs to implement the CET. In the same year, Kazakhstan joined the WTO. After joining the WTO, Kazakhstan’s bound rate commitments appeared to be lower than the rates of the CET for around 3,500 goods. The average final bound rate in the accession schedule of Kazakhstan was 6.9%, while Russia’s binding tariff, and therefore average CET, stood at the level of 7.8% (Tochitskaya, 2016).

4.3

DYNAMICS OF MUTUAL TRADE BETWEEN THE EAEU MEMBER STATES AND WITH EXTERNAL PARTNERS

4.3.1

EAEU Internal Trade

According to the Eurasian Economic Commission (EAEC), the volume of mutual trade in goods (intra-regional merchandise exports) of the EAEU member states increased by 60%, from $45.6 bn to $73.1 bn between 2015 and 2021 (Table 4.1). For ten months of 2022, mutual trade increased by 12.8% – from $58.5 bn to $67 bn. In January–October 2022, Armenia and Kyrgyzstan increased the supply of goods to the EAEU market to the greatest extent. Armenia’s exports increased 2.5 times (from $0.7 bn to $1.8 bn), Kyrgyzstan’s exports almost doubled (from $0.66 to $1.3 bn). Such a high growth in exports for Armenia and Kyrgyzstan is due to the increase in the supply of parallel imports to Russia, primarily electrical equipment and vehicles (HS codes 84–90). Russian exports to the markets of EAEU partners remained almost unchanged over this period (+1%). Russia’s exports to

Trade, Customs Union, and the EAEU Common External Tariff  43 EAEU markets increased for food products (+40%), chemical products (+10%), and clothing (+26%). A decrease was recorded for the supply of mineral products (−15%), and machinery and equipment (−21%). Table 4.1 Country/region

The volume of mutual trade in goods (intra-regional exports) of the EAEU member states in 2010–2021, bn US dollars 2010

2015

2016

2017

2018

2019

2020

2021

2022 (Jan– Oct)*

EAEU

44.8

45.6

43.0

54.7

60.3

61.6

55.1

73.1

67

Armenia

0.2

0.3

0.4

0.6

0.7

0.8

0.7

0.9

1.8 19.3

Belarus

10.5

11.0

11.4

13.7

13.9

14.6

14.0

17.4

Kazakhstan

3.5

5.1

3.9

5.3

6.0

6.4

5.7

7.8

7.7

Kyrgyzstan

0.4

0.4

0.4

0.5

0.6

0.6

0.6

0.8

1.3

Russia

30.1

28.8

26.8

34.7

39.0

39.2

34.1

46.2

37

Note: *Estimations based on data from national statistical sources. Source: Compiled based on EAEC data.

For the period from 2010 to 2021 the share of Armenia in the EAEU mutual trade in goods (intra-regional exports) changed from 0.4% to 1.2%, of Belarus from 23.5% to 24.1%, of Kazakhstan from 7.8% to 10.6%, while that of the Russian Federation, on the contrary, decreased from 67.3% to 63.1%; the share of the Kyrgyz Republic remained the same – 1.0%. The share of EAEU mutual trade in goods in the member states’ total trade stands at 8% (in 2015 it was only 7.2%). Such a small share can be explained by several factors: ● The two largest economies of the Union (Russia and Kazakhstan) are primarily oriented towards foreign markets; ● The structure of trade within the Union has a different quality from that of trade with external partners, in particular, the share of mineral products in mutual trade between EAEU countries amounts to 25.6%, while in trade with external partners it exceeds 35%; ● Mutual payments for goods within EAEU are made mainly in national currencies (mainly the Russian rouble, accounting for over 70% of all payments for exports and imports of goods and services in mutual trade (Danilov et al., 2018), which weakened against the US dollar over 2015–2021 and affects the value of trade, which is measured in US dollars (EAEC, 2020). Over the period 2015–2021, a significant reduction in the share of mineral products has been recorded, with an increase in the importance of such groups as: machinery, equipment and vehicles (from 16.6% to 18.6% in mutual trade), food and agricultural products (from 15.5% to 17.1%), chemical products (from 11.7% to 12.1%), metals and metal products (from 10.7% to 15.3%) (Table 4.2).

44  The Elgar companion to the Eurasian Economic Union Table 4.2

Commodity structure of mutual trade (intra-regional exports) of EAEU member states in 2015 and 2021, as % of total

HS codes

Product group

2015

2021

10–24

Food and agricultural products

15.5

17.1

Change +1.6

25–27

Mineral products

33.3

18.4

−14.9

28–40

Chemicals and rubber

11.7

12.1

+0.4

41–43

Raw leather, fur and fur products

0.2

0.2

0

44–49

Wood and paper products

2.5

3.2

+0.7

50–67

Textiles and footwear

3.4

3.8

+0.4

72–83

Metals and products thereof

10.7

15.3

+4.6

84–90

Machinery, equipment and transport vehicles

16.6

18.6

+2

Other goods

6.1

11.3

+5.2

Source: Compiled by the authors on the basis of EAEC data.

The change in the structure of mutual trade in favor of higher value-added goods is explained to a greater extent by deeper integration within the EAEU than by price factors. In particular, reducing the negative impact of non-tariff measures in trade between the member states is achieved through the harmonization of national regulations, the adoption of common requirements for products and the mutual recognition of authorization documents. Since 2016, systematic work has been carried out to remove obstacles in the EAEU internal market. Between 2016 and 2021, 76 obstacles were removed,1 the most important of which include: expanding the list of Russian border crossing points where goods can pass through under TIR carnets; abolishing quarantine phytosanitary control on the Kazakh–Kyrgyz part of the state border; abolishing mandatory certification of goods in Kazakhstan that are not included in the single list of products for which mandatory requirements in the EAEU are set; and elimination of the mandatory requirement to ensure the availability of Belarusian-made goods in the compulsory assortment list of Belarus. The launch of the common market for medicines is also worth mentioning, in particular, the transition to the registration procedure for medicines under the unified EAEU rules has been completed (Agapova, 2021). According to calculations based on a global computable general equilibrium model (Knobel and Ermokhin, 2017), the dynamics of mutual trade between the member states were largely determined by integration effects (Knobel, 2015). This is evident from the data presented in Figure 4.1. Model calculations suggest that, due to various factors, trade between Union countries without economic integration would have fallen by 18.7% in 2020, but the observed change, precisely because of lowering barriers to mutual trade, mitigated the fall to 13.6%. Thus, the contribution of integration to the mutual trade of the EAEU countries in 2020 was 5.1 percentage points (pp). In 2019, in the absence of EAEU integration, the growth rate of mutual trade of EAEU countries would have been negative and amount to −2.7%; the integration effect in the year under observation was 6.2 pp.

1 According to the Register of Obstacles of the EAEC: electronic database of barriers, derogations and restrictions with respect to movement of goods, services, capital and labor.

Trade, Customs Union, and the EAEU Common External Tariff  45  

Source: Authors’ calculations.

Figure 4.1

Contribution of Eurasian integration to the growth of EAEU mutual trade, 2016–2021

Source: Compiled by the authors on the basis of EAEC data.

Figure 4.2

Comparison of EAEU external and mutual trade volumes for 2015–2021, in bn USD and in % of previous period

46  The Elgar companion to the Eurasian Economic Union Simultaneously with a significant effect on mutual trade, Eurasian integration has had a very limited impact on the dynamics of external trade. The results presented in this chapter suggest that, on average, the contribution of integration to changes in trade of EAEU member states with third countries is estimated at no more than 0.5%, while the observed changes in foreign trade were much more extensive and, in some years, reached tens of percent. 4.3.2

EAEU External Trade

The volume of trade of EAEU countries with external partners still significantly exceeds the volume of mutual trade of EAEU member states, while annual growth rates are almost identical (Falina and Slastenko, 2017). Between 2015 and 2021, the value of EAEU trade with external partners increased by more than 46%, from $578.4 bn to $846.4 bn (Figure 4.2). Mutual trade increased by 60.3%, from $45.6 bn to $73.1 bn. Mineral products are the prevailing commodity group of the EAEU’s external exports: it covered 48.7% of total EAEU commodity exports to third countries in 2021. Meanwhile, in contrast to mutual trade, the share of that commodity group in external exports remains almost unchanged. The share of food products is increasing (Table 4.3). Table 4.3

Aggregated structure of EEU merchandise exports to third countries in 2015 and 2021, as % of total

HS codes

Product group

2015

2021

Change

10–24

Food and agricultural products

4.4

6.3

+2.0

25–27

Mineral products

55.3

48.7

−6.6

28–40

Chemicals and rubber

7.1

6.3

−0.8

41–43

Raw leather, fur and fur products

0.1

0.0

−0.1

44–49

Wood and paper products

2.6

3.4

+0.8

50–67

Textiles and footwear

0.2

0.2

0.0

72–83

Metals and products thereof

9.7

10.7

+1.0

84–90

Machinery, equipment and transport vehicles

3.7

3.8

0.0

Other goods

16.9

20.5

+3.7

Source: Compiled on the basis of EAEC data.

Major imports from countries outside the EAEU include machinery, equipment and vehicles, chemical products and rubber, food and agricultural raw materials, metals and metal products, textiles, textile products and footwear. The structure of EAEU external merchandise imports has not changed significantly over 2015–2021 (Table 4.4).

Trade, Customs Union, and the EAEU Common External Tariff  47 Table 4.4

Aggregated structure of EEU merchandise imports from third countries in 2015 and 2021, as % of total

HS codes

Product group

2015

2021

10–24

Food and agricultural products

14.2

10.6

Change −3.6

25–27

Mineral products

1.6

1.1

−0.5

28–40

Chemicals and rubber

18.5

18.5

0.0

41–43

Raw leather, fur and fur products

0.5

0.4

0.0

44–49

Wood and paper products

2.1

1.4

−0.6

50–67

Textiles and footwear

6.0

6.4

+0.3

72–83

Metals and products thereof

6.9

6.3

−0.7

84–90

Machinery, equipment and transport vehicles

43.8

46.7

+2.9

Other goods

6.5

8.6

+2.2

Source: Compiled on the basis of EAEC data.

4.4

CUSTOMS AND TARIFF REGULATION IN THE EAEU: KEY ISSUES

Under the EAEU Treaty, the obligations of EAEU member states in the field of customs and tariff regulation include: ● Application of the Customs Code of the Eurasian Economic Union (common requirements in the field of customs regulation); ● Application of the Common Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union (CNFEA); ● Application of uniform preferential and non-preferential rules of origin for goods imported into the customs territory of the EAEU (Competence of the EAEC); ● Application of the Common Customs Tariff of the Eurasian Economic Union (import duty rates) and the Common System of Tariff Preferences of the Eurasian Economic Union. In addition, it is important to note that customs and tariff regulation issues have been transferred to supranational competence (the competence of the EAEC Board). Import duties paid are to be credited and distributed between the budgets of the member states. The calculation of the amount of import customs duties to be transferred to the budgets of member states is made by multiplying the total amount of import customs duties to be distributed among the member states by the distribution ratios. The ratios changed several times between 2015 and 2021 for different reasons. For example, in 2015 the changes were caused by the accession of Kyrgyzstan, and in subsequent years by changes in the shares of EAEU states in total imports of the Union. In 2022, the following ratios for the distribution of import duties were in place: Armenia – 1.22%; Belarus – 4.86%; Kazakhstan – 6.96%; Kyrgyzstan – 1.9%; Russia – 85.07%.

48  The Elgar companion to the Eurasian Economic Union 4.4.1

Exemptions from the Common External Tariff

International legal obligations of the EAEU member states in the field of customs-tariff regulation derive from the tariff concessions that they accepted accompanying the process of accession to the WTO Agreement. Tariff concessions (tariff binding) are expressed in the obligation of a WTO member not to increase the rate of import customs duty above a certain value. The basis for interaction between the EAEU and WTO law is Annex 31 to the EAEU Treaty (Astana, 29.05.2014), which refers to the Treaty on the Functioning of the Customs Union within the Multilateral Trading System (Minsk, 19.05.2011). According to its provisions, this interaction is based on the following principles: ● From the date of accession of any Customs Union (EAEU) Member State to the WTO, the provisions of the WTO Agreement, as defined in that Party’s Protocol of Accession to the WTO, which includes commitments made as a condition of its accession to the WTO, become part of the Customs Union’s legal system. ● The Parties will take measures to bring the legal system of the Customs Union and the decisions of its bodies into conformity with the WTO Agreement, as laid down in each Party’s Protocol of Accession, including each Party’s obligations undertaken as a condition of its accession to the WTO. ● Until these measures are adopted, the provisions of the WTO Agreement, including the commitments made by the Parties as conditions for their accession to the WTO, take precedence over the relevant provisions of international treaties concluded within the Customs Union and decisions taken by its bodies (Boklan, 2017). The original version of the Common Customs Tariff of the Customs Union (subsequently, the CET of the EAEU) reflected Russia’s tariff concessions, as it was the first member state of the Customs Union to join the WTO. The subsequent accession of Armenia and Kyrgyzstan to the Eurasian economic integration caused a deviation from the principles of the customs union. At the time of accession to the EAEU Treaty, both states were already WTO members and were bound by their own tariff concessions, which in some cases diverged from the CET of the EAEU. Therefore, Armenia and Kyrgyzstan had the right to maintain individual rates of import customs duties during the transition period. For example: ● When importing pork trimmings into Armenia (HS code: 0203 29 550 3) the rate of import customs duty until the end of 2020 was 10%, during 2021 – 15%, while the basic rate of the CET of the EAEU was 25%; ● When importing seed potatoes into Kyrgyzstan (HS code: 0701 10 000 0), the import customs duty rate was 0% during the entire transition period, while the base CET rate of the EAEU reached 5%. This situation created exemptions from the unified customs tariff regulation, which (as follows from the term itself) implies unity in terms of the choice of import customs duty rates. At the same time, goods that were delivered to the territory of Armenia and Kyrgyzstan at lower rates could be in circulation exclusively in Armenia or Kyrgyzstan (respectively) and were deprived of the freedom of movement of goods in the customs territory of the EAEU. It was possible to restore this freedom and gain access to the market of other EAEU member states

Trade, Customs Union, and the EAEU Common External Tariff  49 only by paying the difference between the import customs duty calculated at the base rates of the EAEU CET and the import customs duty actually paid in Armenia or Kyrgyzstan at a lower rate. With the completion of the transition periods, the withdrawals were overcome as a result of the transition of Armenia and Kyrgyzstan to the CET rates of the EAEU. Additional difficulties for the unified customs and tariff regulation were caused by the accession of Kazakhstan to the WTO Agreement. At the time of gaining membership in the WTO, the country was already a member state of the EAEU, and therefore adhered to the CET of the EAEU (Kovalev et al., 2019). However, this did not become an obstacle for Kazakhstan to agree on its own set of tariff concessions. As a result, on the basis of these tariff concessions, individual rates of import customs duties were established for Kazakhstan. About 3,500 commodity items (25% of the commodity nomenclature) fell into exemptions from the CET of the EAEU. This gave rise to another exemption from the unified customs and tariff regulation, which was reinforced by the abolition of the freedom of movement of goods in the customs territory of the EAEU: if the goods were delivered to Kazakhstan at lower rates of import customs duty than provided for by the CET of the EAEU, then they could only be in circulation in the territory of Kazakhstan. At the same time, unlike the situation in Armenia and Kyrgyzstan, this freedom could not be restored by paying the difference between the import customs duty calculated at the current EAEU CET rates and the import customs duty actually paid in Kazakhstan at a lower rate. Another difference between the situation with Kazakhstan and the situation with Armenia and Kyrgyzstan is that it is not Kazakhstan that should return to the application of the EAEU CET, but the EAEU CET should be brought into line with the tariff concessions of Kazakhstan (Dragneva and Wolczuk, 2017). This means that the EAEU CET needs to be amended by reducing the rates of import customs duties on certain goods to the level agreed by Kazakhstan. For certain types of fish, such modifications have already been implemented: for example, import customs duties on Pacific salmon, Atlantic salmon, and Danube salmon have been zeroed. This is explained by the fact that in the case of Kazakhstan, the norm of the Treaty on the Functioning of the Customs Union within the Multilateral Trading System (Minsk, 19.05.2011) is applied. It stipulates that: Upon the subsequent accession to the WTO of the other Party, its obligations, accepted as a condition for accession to the WTO, relating to legal relations, the powers to regulate which within the framework of the Customs Union are delegated by the Parties to the bodies of the Customs Union … become part of the legal system of the Customs Union.

A comparative legal analysis of the scenario of Armenia and Kyrgyzstan (first in the WTO – then in the EAEU) and the scenario of Kazakhstan (first in the EAEU – then in the WTO) is presented in Table 4.5. An ambiguous exemption from the unified customs and tariff regulation, which is caused by the international legal obligations of the EAEU member states, are retaliatory measures. Thus, Russia unilaterally applies higher rates of import customs duties on certain goods of American origin. For example, when importing to Russia:

KYRGYZSTAN

KAZAKHSTAN

WTO

3. With the subsequent accession to the WTO of another Party to the

EAEU (Moscow, 08.05.2015), Appendix No. 1, paragraph 42.

clause 39.

Armenia’s commitments contained in the Report of the

application by the Kyrgyz Republic of the Treaty on the EAEU (Moscow, 08.05.2015), Annex No. 1, paragraph 41. In connection with the accession of Kyrgyzstan to the EAEU, negotiations are underway with WTO members to change the relevant tariff obligations of Kyrgyzstan. The agreements reached as a result of negotiations before their final adoption in the WTO are approved by the EAEC Council. In accordance with these agreements, appropriate changes are being made to the CET of the EAEU.

Treaty on the EAEU (Minsk, 10.10.2014), Annex No. 3,

clause 38.

In connection with Armenia’s accession to the EAEU,

negotiations are being held with WTO members to change

the corresponding tariff obligations of Armenia.

The agreements reached as a result of negotiations before

their final adoption in the WTO are approved by the EAEC

Council.

In accordance with these agreements, appropriate changes

are being made to the CET of the EAEU.

related to the accession of the Republic of Kazakhstan to the WTO”.

EAEU member states or the EAEU as a whole.

Protocol on conditions and transitional provisions on the

Decision of the SEEC dated October 16, 2015 No. 22 “On some issues

Establishing the WTO do not become obligations of other

WTO.

obligations of Kazakhstan, accepted as a condition for joining the

duty rates for certain categories of goods, taking into account the

changes to the EAEU CET in order to establish import customs

It was decided to work out the issue of the advisability of introducing

WTO, … become part of the legal system of the CU.

on Kyrgyzstan’s Accession to the Marrakesh Agreement

Treaty on the accession of the Republic of Armenia to the

apply to other EAEU member states.

Treaty, its obligations, accepted as a condition for accession to the

multilateral trading system (Minsk, 19.05.2011), article 1, paragraph

application by the Kyrgyz Republic of the Treaty on the

Working Group on Armenia’s accession to the WTO do not The obligations of Kyrgyzstan contained in the Protocol

Agreement on the functioning of the CU within the framework of the

Protocol on conditions and transitional provisions on the

Treaty on the EAEU (Minsk, 10.10.2014), Annex No. 3,

Yes

Treaty on the accession of the Republic of Armenia to the

Rationale:

No, if the tariff concessions remain unchanged.

Is it necessary to change the rates of the Common External Tariff of the EAEU in accordance with the tariff concessions of Armenia, Kyrgyzstan and Kazakhstan?

ARMENIA

Scenario 2: Accession to the EAEU precedes accession to the

Comparative legal analysis of the scenario of Armenia and Kyrgyzstan (accession to the WTO precedes accession to the EAEU) and the scenario of Kazakhstan (accession to the EAEU precedes accession to the WTO)

Scenario 1: Accession to the WTO precedes accession to the EAEU

Table 4.5

50  The Elgar companion to the Eurasian Economic Union

WTO

Scenario 2: Accession to the EAEU precedes accession to the

the territory of Kazakhstan from the territories of third countries and placed under the customs procedure for release for internal

measures to prevent the export of such goods to the territory according to the list *, only within its territory and take measures to states of the EAEU. *List of goods in respect of which the Republic of Kazakhstan, in accordance with the obligations assumed as a condition for accession to the WTO, the rates of import customs duties are applied, which are

customs duty rates are lower than those of the EAEU

unified customs duties only within its territory and will take consumption with the payment of import customs duties at rates prevent the export of such goods to the territories of other member

Kyrgyzstan will ensure the use of goods for which import

of other EAEU member states without additional payment of the difference in the amounts of import customs duties, calculated at the CET rates of the EAEU, and the amounts of import customs duties paid when importing such goods into the territory of Kyrgyzstan.

Armenia will ensure the use of goods subject to lower rates

of import customs duties compared to the CET rates of

the EAEU only within its territory and will take measures

to prevent the export of such goods to the territories of

other EAEU member states without additional payment

of the difference in the amounts of import customs duties

calculated at the CET rates of the EAEU, and the amounts

of import customs duties paid when importing goods into

the territory of Armenia.

Until 02/28/2022, rates for certain types of fish have been reduced to 0%.

period. No other tariff concessions were agreed within the framework of the WTO.

other tariff concessions were agreed within the framework

of the WTO.

Source: Compiled by the authors.

reflect Kazakhstan’s tariff concessions:

EAEU CET rates apply due to the end of the transition

In 2019, the following changes were made to the EAEU CET to

the amounts of such rates of duties.

CET rates apply due to the end of the transition period. No

From 2022, when importing goods into Armenia, the EAEU From 2021, when importing goods into Kyrgyzstan, the

Further developments

Kazakhstan is obliged to ensure the use of goods imported into

EAEU (Moscow, 08.05.2015), Annex No. 1, paragraph 43.

paragraph 40.

lower compared to the rates of duties of the CET of the EAEU, and

related to the accession of the Republic of Kazakhstan to the WTO”.

application by the Kyrgyz Republic of the Treaty on the

Treaty on the EAEU (Minsk, 10.10.2014), Annex No. 3,

Features of the circulation of goods imported at the rates of import customs duties, determined individually for Armenia, Kyrgyzstan and Kazakhstan in the customs territory of the EAEU Decision of the SEEC dated October 16, 2015 No. 22 “On some issues Protocol on conditions and transitional provisions on the Treaty on the accession of the Republic of Armenia to the

Scenario 1: Accession to the WTO precedes accession to the EAEU

Trade, Customs Union, and the EAEU Common External Tariff  51

52  The Elgar companion to the Eurasian Economic Union ● Optical fiber (HS code: 9001 10 900 1) originating in the USA is taxed at a rate of 30%, while the basic EAEU CET rate is only 3%; ● Fork lift trucks (HS code: 8427 20 110 0) originating in the USA are taxed at a rate of 25%, while the basic EAEU CET rate is only 5%. Russia justifies its actions with reference to: ● Russian legislation, namely: article 40 “Response measures” of the Federal Law “On the fundamental principles of state regulation of foreign trade activity” dated 08.12.2003 No. 164-FZ; ● the EAEU law, namely Article 40 “Third party response” of the EAEU Treaty; ● the WTO law, namely Article 8 “Suspension of concessions and other commitments” of the Agreement on Special Protective Measures. In December 2022, Russia introduced increased rates of import customs duties on the import of a number of personal hygiene items, such as shampoos and toothpaste, and weapons originating from unfriendly countries.2 For example, import duties on shampoos (HS code: 3305 10 000 0) was increased from 6.5 to 35% (Decree of the Government of the Russian Federation No. 2240 dated December 7, 2022). This time the reference was made only to the EAEU law, namely Article 40 “Third party response” of the EAEU Treaty. Under the EAEU Treaty (Astana, 29.05.2014): in cases stipulated by international treaties of member states with third parties concluded before 1 January 2015, member states have the right to unilaterally apply higher rates of import customs duties than the Common External Tariff of the Eurasian Economic Union as retaliatory measures, as well as to unilaterally suspend the provision of tariff preferences.

According to this provision, in order to exercise the right to unilateral retaliatory measures, it must be established that the very possibility of imposing retaliatory measures is provided for by “international treaties of member states with third parties concluded before 1 January 2015”. For Russia, such an international treaty is the Agreement on Special Safeguard Measures (Russia joined the WTO on August 22, 2012), which Russia refers to when justifying retaliatory measures against the United States, which is part of the WTO Agreement, adjoining the text of the General Agreement on Tariffs and Trade 1994, which is Annex 1A to the WTO Agreement. However, in the case of Kazakhstan, the situation is different: the agreements of the “WTO Package” (annexes to the WTO Agreement) are not “international agreements between member states and third parties concluded before January 1, 2015” for it (Baghdasaryan and Pakhomov, 2016). This is due to the fact that Kazakhstan joined the WTO on November 30, 2015.

The list of unfriendly countries was expanded by the Decree of the Government of the Russian Federation No. 430-r dated March 5, 2022 and No. 1998-r dated July 20, 2022. Part of increased rates applies only for imports from USA, Canada, United Kingdom, Australia, New Zealand and Poland. 2

Trade, Customs Union, and the EAEU Common External Tariff  53 4.4.2

Rules of Origin

The EAEU Treaty provides for the development of: ● Preferential rules of origin, which will be applied solely for the purpose of granting tariff preferences to developing and least developed countries, as well as to states that have concluded free trade agreements (preferential agreements) with the EAEU. ● Non-preferential rules of origin, which will apply in all other cases, i.e., in relation to preferential countries (in everything that does not concern tariff preferences), and in relation to other third countries (on the whole spectrum of measures of foreign trade regulation). However, the EAEU Treaty ignored the preferential rules of origin that the EAEU member states apply in trade with the CIS (the Commonwealth of Independent States) countries and which supplement the preferential agreements concluded with them, including the Treaty on the Free Trade Zone (St. Petersburg, 18.10.2011) and bilateral free trade agreements. Moreover, this set of preferential rules does not apply purely to tariff preferences, but to measures of tariff and non-tariff regulation (Komendantov and Chistyakova, 2021). A visual representation of the coverage of rules of origin until 2021 is presented in Figure 4.3. The choice of rules of origin for the purpose of applying internal market protection measures against CIS member states fell into a “grey area”. On the one hand, the Non-Preferential Rules of Origin were to be applied in respect of special safeguard, anti-dumping and countervailing measures. On the other hand, this issue was not explicitly excluded from the scope of CIS Rules of Origin. This created prerequisites for circumventing existing anti-dumping measures: exporters affected by the measures could, if they wished, transfer the production of the goods (specific production operations that met the criteria for sufficient processing) to a CIS member state, “substitute” their origin and then also benefit from tariff preferences (free trade regime). In 2021, this problem was solved thanks to a novella that originated in the Non-Preferential Rules of Origin: The rules do not apply to goods whose origin is confirmed in accordance with an international agreement between an EAEU member state and a third party or an international agreement to which all EAEU member states are parties, concluded before January 1, 2015 and providing for the provision of preferences in trade with such a third party, with the exception of goods similar to those in respect of which, in accordance with the Treaty on the EAEU, measures of protection of the internal market are applied, due to the origin of the goods.

Thus, the interaction between the Non-Preferential Rules of Origin and the Preferential Rules of Origin with regard to CIS member states has been clarified. For the purposes of applying special safeguard, anti-dumping and countervailing measures, only the Non-Preferential Rules of Origin have to be relied upon, notwithstanding the existence of the other rules of origin. It has thus eliminated the possibility of circumventing measures to protect the domestic market by substituting the country of origin of goods, which could have been done by localizing certain assembly operations in the CIS member states.

54  The Elgar companion to the Eurasian Economic Union  

Source: Compiled by the authors.

Figure 4.3

Coverage of rules of origin until 2021

Trade, Customs Union, and the EAEU Common External Tariff  55 4.4.3

Residency Principle

On the territory of the EAEU, the principle of residency is preserved, which is expressed in the fact that during customs declaring, the declarant and his or her goods must be in the same place, namely in the state of registration of the declarant. This creates logistical difficulties for companies: for example, at the moment, exporters cannot place goods in warehouses in those EAEU countries that are geographically closer to a potential sales market. The EAEU customs declaration is based on the “residency principle”, i.e., the applicant shall submit a customs declaration only to specific customs bodies of the country where the applicant is registered or permanently lives in the EAEU. A customs representative (also may be in the status of an exporter) has the right to perform customs operations at the place of inclusion in the register of customs representatives, i.e., only in a particular member state of the EAEU, the effect of preliminary decisions on the classification of goods is limited to the territory of a particular member state of the EAEU, which also makes it difficult for an exporter to carry out operations to export his or her products from the territories of different states of the Union (Ruchkina and Shaidullina, 2019). The customs services of the EAEU member states use different information systems and do not provide each other with access to them. This does not allow to establish full mutual recognition of the results of customs control carried out in one EAEU state (at the location of the goods) in another EAEU state (at the place of filing the declaration), and therefore, to verify the legitimacy of the release of goods. For example, if the residency principle is canceled tomorrow, the exporter or importer in Russia does not have the technical ability to submit electronic documents to the state authorities of other EAEU member states. The reason is the low degree of integration of customs information systems (including information exchange).

4.5

CONCLUSION AND KEY OBSERVATIONS

Mutual trade in goods has grown significantly in the EAEU. Moreover, it has undergone significant structural changes, which have enabled a major reduction in the share of mineral products. The developments of 2022 lead to a readjustment of Russia’s trade flows (primarily imports) towards the EAEU countries. In the first ten months of 2022, Russia increased the value of imports from the EAEU by almost 40%. The bulk of the growth came from goods for which parallel imports were allowed. For example, Russia’s imports of machinery, electrical equipment and vehicles rose by nearly 80% over the period under review (to $7.5 bn). In the short term, this trend is likely to continue as sanctions tighten. The collision between international legal obligations (more specifically, tariff concessions accepted by EAEU member states upon accession to the WTO) and the common customs and tariff regulation is that: ● First, they lead to exemptions from the EAEU CET, as a result, the rates of import duties of individual member states of the EAEU differ from the level of tariffs of the CET rates of the EAEU. ● Second, they encroach on the freedom of movement of goods in the customs territory of the EAEU (one of the key advantages of the customs union) due to the fact that they limit

56  The Elgar companion to the Eurasian Economic Union the circulation of exempt goods at the level of a particular EAEU member state and do not allow it to penetrate its territory. At the same time, it is worth recognizing that the model developed for Armenia and Kyrgyzstan seems quite natural. The final transition to the CET of the EAEU is the logical conclusion of their membership in the customs union, the very existence of which implies the implementation of a common trade policy towards third countries. In 2022, Armenia and Kyrgyzstan finally switched to the Common Customs Tariff of the EAEU (with one exemption for imported vehicles (HS codes: 8702, 8703, 8704) until the end of 2023). In the future, a similar model may be in demand when new members join the EAEU, which are already members of the WTO. In turn, the model developed for Kazakhstan reflects the intentions of the EAEU member states expressed in the Treaty on the Functioning of the Customs Union within the Multilateral Trading System (Minsk, 19.05.2011). In this international treaty, the parties express their readiness to make changes to the EAEU CET as the EAEU member states join the multilateral trading system (i.e., the WTO). In the future, a similar model may be in demand when new members join the WTO, which are already EAEU member states (for example, Belarus). The Strategic Directions for Developing Eurasian Economic Integration until 2025 include a number of provisions that directly address the problem of exemptions from the CET of the EAEU, in particular, paragraph 2.1.1: “Preparation of proposals for tariff negotiations of the Republic of Kazakhstan in the World Trade Organization (WTO) as part of the convergence of the obligations of states members”. The exact terms for eliminating the exemption from the CET of the EAEU of Kazakhstan are not indicated – this is the subject of negotiations at the WTO platform. However, until the exemption is eliminated, it will be impossible to talk about the full functioning of the economic union. The events since 2022 are also complicating the issue of exemptions from the CET. In addition to the already existing increased tariffs on certain goods from the USA, Russia has introduced increased rates of import customs duties on a number of goods from unfriendly countries. Most likely, this practice will expand as goods from unfriendly countries are replaced by supplies from neutral partners. The problem of the residency principle could be solved by establishing information interaction between the customs services of the EAEU countries, for example, within the framework of the EAEU Integrated Information System (IIS). The current level of interaction between them does not allow for its abolition. It is also important to note that the EAEU Customs Code sets out possible steps to overcome the “residency principle”: in the future, EAEU states may conclude an agreement that will create the necessary basis for a company from one EAEU state to declare goods in another EAEU state. At the same time, this will mean that goods will not be “tied” to the place of the declarer’s registration, but can be located directly in the EAEU state where the customs declaration is made. The example of harmonization of rules of origin in the EAEU and CIS legal systems in 2021 illustrates the need for coordination between EAEU member states in terms of regulating foreign trade in goods with third countries. The emergence of possible contradictions can create a fertile ground for the misuse of existing rules by companies who, by taking advantage of differences in legal approaches to the same issue (a significant risk of such conflicts is inherent in the country of origin), will be able to circumvent foreign trade regulation measures that are burdensome for them.

Trade, Customs Union, and the EAEU Common External Tariff  57 To summarize, we can expect that by 2030 most of EAEU member countries’ import duty rates will be in line with the EAEU CET. The only exception may be for Russia if sanctions remain for the long time and the Russian government introduces new tariffs from unfriendly countries. By 2030, the Union will have developed the necessary experience in the convergence of tariffs both for countries that joined the WTO before accession to the EAEU and for those that joined the WTO after accession to the Union. Thus, there will be a single customs territory within the EAEU with few exemptions.

REFERENCES Agapova, A. (2021). Analysis of obstacles to the functioning of the EAEU domestic market. Builletten Innovatsionnykh Tekhnologii, 3(19), 5–8. Agreement on the functioning of the Customs Union within the framework of the multilateral trading system. https://​docs​.cntd​.ru/​document/​902307828. Bagdasaryan, K., & Pakhomov, A. (2016). Issues regarding EAEU members’ participation in the WTO activity. Russian Economic Developments, Moscow, 11, 52–58. Balassa, B. (1965). Trade liberalization and revealed comparative advantage. The Manchester School of Economic and Social Studies, 33(2), 99–123. Boklan, D. S. (2017). Eurasian Economic Union and World Trade Organization: Correlation of legal regimes. Law: Journal of the Higher School of Economics, 2, 223–236. Common Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union and Common External Tariff of the EAEU. http://​www​.eurasiancommission​.org/​ru/​act/​trade/​catr/​ett/​ Pages/​default​.aspx. Danilov, Y., Buklemishev, O., Sednev, V., & Korshunov, D. (2018). National Currencies in Mutual Payments Within the EAEU: Barriers and Prospects. Eurasian Development Bank Centre for Integration Studies Report 48. Dragneva, R., & Wolczuk, K. (2017). The Eurasian Economic Union: Deals, Rules and the Exercise of Power. Chatham House Research Paper. Eurasian Economic Commission (2020). Report “On the state of mutual trade between the member states of the Eurasian Economic Union in 2019”. https://​eec​.eaeunion​.org/​upload/​medialibrary/​84f/​Report​ _2019​.pdf. Falina, N. V., & Slastenko, E. S. (2017). The current state and features of the development of foreign and mutual trade of the member countries of the Eurasian Economic Union. Scientific Journal of KubGAU, 130(6), 680–694. Federal Law No. 164-FZ of 08.12.2003 “On the Fundamental Principles of State Regulation of Foreign Trade Activities”. https://​mvd​.consultant​.ru/​documents/​50394. Knobel, A. (2015). Eurasian Economic Union: Development prospects and possible obstacles. Economic Issues, 3, 87–108. Knobel, A., Lipin, A., Malokostov, A., Tarr, D. G., & Turdyeva, N. (2019). Deep integration in the Eurasian Economic Union: What are the benefits of successful implementation or wider liberalization? Eurasian Geography and Economics, 60(2), 177–210. Knobel, A. Y., & Ermokhin, I. S. (2017). Assessment of the macroeconomic impact of lowering barriers to domestic market development based on OECD approaches, including the market regulation database (Indicators of product market regulation). “Cooperation of the EAEU Member States with the OECD in the context of developing the Union’s integration agenda. Opportunities for the use of OECD best practices in the work of the EAEU 2017”. http://​www​.eurasiancommission​.org/​ru/​act/​ trade/​SiteAssets/​. Komendantov, S. V., & Chistyakova, E. S. (2021). On regulation of the institute of origin of goods in the law of the Eurasian Economic Union. Education and Law, 2, 218–222. Kovalev, V., Falchenko, O., & Semin, A. (2019). The EAEU economic and legal exemptions in cross-border trade between Russia and Kazakhstan. https://​doi​.org/​10​.2991/​icsdcbr​-19​.2019​.50.

58  The Elgar companion to the Eurasian Economic Union Krueger, A. O. (1997). Free trade agreements versus customs unions. Journal of Development Economics, 54(1), 169–187. List of goods for which the Republic of Kazakhstan, in accordance with the obligations assumed as a condition for joining the World Trade Organization, applies import customs duty rates that are lower than those of the Common Customs Tariff of the Eurasian Economic Union, and the amounts of such duty rates. http://​www​.eurasiancommission​.org/​ru/​act/​trade/​catr/​ttr/​Documents/​%D0​%9F​%D0​ %95​%D0​%A0​%D0​%95​%D0​%A7​%D0​%95​%D0​%9D​%D0​%AC​%20​%D0​%A0​%D0​%9A​%20​%D0​ %BD​%D0​%B0​%2002​.01​.2022​.pdf. Protocol on the Functioning of the Eurasian Economic Union within the Multilateral Trading System. http://​www​.consultant​.ru/​document/​cons​_doc​_LAW​_163855/​c​acce0667c8​b47c6337d7​4d7ccd1549​ 298081691/​. Register of Obstacles of the Eurasian Economic Commission. https://​barriers​.eaeunion​.org/​. Ruchkina, G. F., & Shaidullina, V. K. (2019). Factors hindering the EAEU exports to third countries and reducing Russia’s export competitiveness. Economics, Taxes & Law, 12(1), 136–143. Tarr, D. (2016). The Eurasian Economic Union among Russia, Belarus, Kazakhstan, Armenia and the Kyrgyz Republic: Can it succeed where its predecessor failed? Eastern European Economics, 54(1), 1–22. The Strategic Directions for Developing the Eurasian Economic Integration until 2025. https://​docs​ .eaeunion​.org/​docs/​ru​-ru/​01228321/​err​_12012021​_12. The Treaty on the Eurasian Economic Union (Astana, 29.05.2014). http://​www​.consultant​.ru/​document/​ cons​_doc​_LAW​_163855/​. The Treaty on the Free Trade Zone (St. Petersburg, 18.10.2011). http://​www​.eurasiancommission​.org/​ru/​ act/​trade/​dotp/​sogl​_torg/​Documents/​FTA​%20CIS​_Text​_with​_protocols​_ENG​.pdf. The Treaty on the Functioning of the Customs Union within the Multilateral Trading System (Minsk, 19.05.2011). https://​www​.wto​.org/​english/​thewto​_e/​acc​_e/​kaz​_e/​wtacckaz69​_leg​_1​.pdf. Tochitskaya, I. (2016). Kazakhstan’s accession to the WTO: Overview and implications for the Eurasian Economic Union. GET Belarus / IPM Research Center Policy Paper Series [PP/01/2016]. Viner, J. (1950). The Customs Union Issue. New York: Carnegie Endowment for International Peace. World Bank (2012). Assessment of Costs and Benefits of the Customs Union for Kazakhstan. Washington, DC: World Bank. https://​openknowledge​.worldbank​.org/​handle/​10986/​2722.

5. Functional markets of the EAEU: selected case studies Viachaslau Yarashevich

5.1 INTRODUCTION Article 4 of the founding Treaty (FT) of the Eurasian Economic Union (EAEU) signed in Astana on 29 May 2014 and entered into force on 1 January 2015 stipulates “creation of a common market for goods, services, capital and labour within the Union” as one of its three main objectives, the other two including “sustainable economic development” and “comprehensive modernisation, cooperation and competitiveness” (Treaty, 2014, p. 6). From this elevated positioning in the FT one can presume that common markets are pivotal to the EAEU’s formal rationale, a stance typical for more ambitious projects in modern regionalism (Munakata, 2004). For instance, in the European Union (EU) as, perhaps, the most advanced example of the latter, the common market concept was addressed explicitly both in its founding treaties and in the preceding political manifestos, arguably remaining its “core business” at present (Dinan, 2004; Pelkmans, 2019). Since the EAEU, along with its various forerunners, has been modeled, even if implicitly and imperfectly, on the European counterpart (Libman, 2007, pp. 402–403; Libman and Obydenkova, 2018, pp. 152, 162), there is a scope, at least theoretical, for a similar common market logic. Given the relative “youngness” of the Eurasian project, however, talking about its markets in terms of their “commonality” appears a little premature, at least in practice. Indeed, there may be a substantial normative framework and appropriate political discourse for all things common within the EAEU, but its functional markets, which arguably denote institutional platforms of cross-border goods exchange, remain largely national and fragmented from the Eurasian viewpoint. As the EAEU derives from the Customs Union (CU) of 2010 (Yarashevich, 2014b, p. 585; see also Yarashevich, 2014a), this goods-exchange view of its functional markets seems quite natural. It is reinforced by the absence of CU-like comprehensive legal frameworks governing both external and internal exchange of services, capital and labor in the EAEU. With the ratio of mutual merchandise trade in the bloc barely moving since its launch in 2015, lagging way behind that of its more advanced regionalist peers, such an approach may also help to get to the roots of this fundamental deficiency (Yarashevich, 2021, p. 312). There are several currents in modern-day research of international economic integration, originating the EU studies: functionalism, neofunctionalism, federalism, supranationalism, and intergovernmentalism (Diesen, 2021, p. 26; Schadrina, 2021, p. 152). While at first sight the EAEU may well qualify for a comparison with its Western counterpart and direct neighbor, which was indeed time and again alluded to as both a model and a rival, the empirical underpinnings of the Eurasian integration, not least post-communism and Russian domination, are profoundly different from those of the European one. Hence, the application of the post-war theoretical approaches developed by, inter alia, Deutsch (1954), Haas (1958), Hoffmann 59

60  The Elgar companion to the Eurasian Economic Union (1966), Lindberg and Scheingold (1971), and Wallace (1982), and more recently revised by, inter alia, Baldwin (2020), Leuffen (2013), Moravcsik (1998), and Richardson (2005), all with respect to the European experience, may be not quite as relevant in the Eurasian context. Paraphrasing Nye (1965), then, “the heavy coat of European theory needs alteration before it can be worn in … climates” of the EAEU (p. 18). To begin with geography, the European integration has brought together countries on one continent and of roughly similar size, while by its very name its Eurasian counterpart is an intercontinental endeavor, with one country not only dwarfing others, but also stretching from Eastern Europe to the Far East in Asia. There are similar differences in other areas, be it demography, history, religion or political economy. Indeed, one thing which can justify placing European and Eurasian integration projects in a comparative perspective is that both stem from grand geopolitical contexts rather than from narrow economic or political considerations.1 In the case of the EU, it is the post-war reconciliation overshadowed and/or fueled by the Cold War, and for the EAEU it is the post-communist transformation and its implications in the aftermath of the global financial crisis. While scholarship on the European integration has developed considerably as it progressed over decades, independent theory of its Eurasian counterpart is at the nascent stage, reflecting the relative youngness of the project itself which is still to reach its first decennary in 2025. In a generally constructive manner, a comprehensive approach to the EAEU genesis has been laid out by Libman and Vinokurov (2012), Antonova and Vymyatnina (2014), and Czerewacz-Filipowicz and Konopelko (2017). Dragneva and Wolczuk (2013), Dutkiewicz and Sakwa (2014), and Lane and Samokhvalov (2015) did it in a more critical way, habitually reflecting suspicious Western attitudes towards any contemporary Russia-led initiatives. Legal concerns, notably regarding regional investment disputes and their resolution, are the focus of a voluminous work edited by Aseeva and Górski (2021), while more general cultural and identity concerns have been addressed by Kirkham (2016) and Kazharski (2019). At the same time, studies devoted to the economics of the EAEU are rare (Piskulova, 2021; Verdiyeva, 2018; Vinokurov, 2018; Vinokurov et al., 2015), particularly works on the making of its functional markets. One exception here is the Eurasian energy market: it has been the focus of such authors as, inter alia, Balmaceda (2021), Garanina (2021), Pastukhova and Westphal (2018), and Verdiyeva (2018). Building on the existing literature yet trying to enrich it with more critical insights, this contribution will focus on the making of the EAEU’s functional markets in agriculture, energy and medicines. The former two belong to the primary sector which in various proportions forms the backbone of the EAEU’s economies even if the bulk of their output and labor is accounted for by the tertiary sector. Indeed, four out five EAEU partners are heavily dependent on commodities, notably hydrocarbons in case of Kazakhstan and Russia, and metals in case of Armenia and Kyrgyz Republic, with the latter two additionally hooked on agriculture, frequently of the subsistence type. In addition, a similar focus will be placed on the EAEU’s pharmaceuticals exchange – a functional market properly belonging to the secondary and tertiary sectors, but for some reason formally chosen as a pioneer of the common market regulation in the bloc. Its scrutiny seems vital for the main argument of this chapter underscoring the deficit of genuine



1

See also Chapter 2 of this Companion.

Functional markets of the EAEU: selected case studies  61 common market genesis in the EAEU stemming partly from its political (and presently even geopolitical) overhang, and partly from lack of strategic sequencing and detailing. Hence, the chapter’s main body will consist of three roughly equal sections each commencing with a critical overview of existing formalities, proceeding with reviewing the relevant literature, looking at the available empirical data and denoting the apparently most acute issues. A summary of the ensuing functional market inquiry will be drawn in the conclusion, which will also come up with suggestions aimed at streamlining Eurasian functional markets into well-functioning arenas of mutual economic cooperation truly in the spirit of the EAEU’s Founding Treaty.

5.2

EAEU’S FUNCTIONAL MARKETS IN THE MAKING: AGRICULTURE GOODS

Formally, the mutual exchange of agriculture commodities2 in the EAEU should foremost fall into the realm of its FT’s Article 28 “Internal market” (Treaty, 2014, p. 27). While proscribing tariff and non-tariff measures in internal trade, it concludes by hinting at possible exceptions, and is immediately followed by Article 29 appropriately titled “Exceptions to the procedure of functioning of the internal goods market” (Treaty, 2014, p. 8). In reality this means that agriculture may be excluded from the tariff dimension but still remains the object of non-tariff regulation. The latter is normally applied on grounds of public health and safety concerns, properly summarized in the first paragraph of the FT’s Article 29. The second paragraph of the latter specifies three major categories of non-tariff measures which are directly related to agriculture: “sanitary, veterinary-sanitary and phytosanitary quarantine” (Treaty, 2014, p. 28). According to some scholars of the Eurasian integration, they are all “natural, protective, and could gradually be significantly unified” within the EAEU (Vinokurov et al., 2015, p. 8). However, it has not happened yet, as the “long-promised establishment of a joint body of sanitary and veterinary control remains a distant and unclear goal” (Troitskiy, 2020). The general non-tariff mechanism with respect to mutual trade is defined in the FT’s eleventh section (Articles 56–59), while its Articles 46–50 outline general principles of non-tariff regulation regarding EAEU’s external partners. Section XXV of the Founding Treaty is dedicated to coordination of agricultural policy in the bloc with the aim of “effective implementation of the resource potential of the Member States for optimization of volumes of competitive agricultural and food products, meeting the needs of the common agricultural market, as well as increasing exports” (Treaty, 2014, p. 106). Finally, along with other key economic areas mentioned in the main body of the EAEU’s FT, there is a supplement which outlines the mechanism of state support for agriculture in the bloc. Most likely following the script of the World Trade Organization, the respective measures are divided into three groups depending on their potential trade effects, with a specification of goods subject to common rules of state support followed by a general framework for its calculation and subsequent information exchange.

In the latest 4th revision of the Standard International Trade Classification (SITC) used by both the United Nations, notably UNCTAD, and the Eurasian Economic Commission, they include all food items (sections 0 “Food and live animals”, 1 “Beverages and tobacco”, and 4 “Animal and vegetable oils, fats and waxes”) and agricultural raw materials from section 2 “Crude materials, inedible, except fuels” less divisions 27 (crude fertilizers and minerals) and 28 (metalliferous ores and metal scrap). 2

62  The Elgar companion to the Eurasian Economic Union The agriculture section of the EAEU’s FT apparently traces its origins to the formative years of the Customs Union, in particular to the Agreement on the rules for state support of agriculture dated 9 December 2010. It was reportedly aimed at limiting the application of support measures distorting mutual trade in products of agriculture, and formed the basis for the Concept and Action plan of the coordinated agroindustrial policy in the framework of the Eurasian Single Economic Space, adopted in 2013 and 2014 respectively (Sidorskiy, n.d.). The very titles of these documents suggest that the vision of agriculture in the EAEU is at least formally shaped in industrial terms. This approach most likely reflects the position of Belarus which had its former prime minister Sergei Sidorskiy shaping the EAEU’s agricultural agenda from 2012 to 2018. According to its English version prepared during Sidorskiy’s tenure, the principal decision on the need to coordinate agricultural policy was first formalized in early 1999, in Article 36 of the Treaty on the Customs Union (the second attempt to create one following the aborted process of the mid-1990s) (Yarashevich, 2014b, p. 585). David Sedik from the Food and Agriculture Organization of the United Nations argued that by 2013 there was in fact “much of the legislative basis … for the operation of the single market” in agriculture (Sedik et al., 2014, p. 5). At the same time, he pointed to the “top-down” nature of the Eurasian integration potentially responsible for its protracted progress: We know already that implementation of the ‘Agreement on the rules for state support of agriculture’ has been less than satisfactory. Kazakhstan and Belarus have reported on levels of subsidies only sporadically and the methodology of reporting has not been consistent, which brings into doubt the feasibility of achieving the much more ambitious goals of the overall policy of economic and political integration within the Customs Union. (Sedik et al., 2014, p. 8)

Perhaps as a corollary of these reportedly unimpressive beginnings one could not find traces of any specific commitments to create a single market for agriculture goods, which can reflect the acknowledgment that mere coordination of national agriculture policies may not be sufficient for such an undertaking. It may be not incidental then that a supplementing Protocol on Agricultural State Support Measures finds itself even further down the EAEU’s FT than its 25th “agro” section, coming 29th among a total of 33 appendices and spanning just 20 pages, hardly sufficient for a common market guide. By contrast, in the Treaty establishing the European Economic Community, among the total of 248 articles agriculture was covered in articles 38 to 47 and addressed as early as in the second section of the second chapter devoted to the principles of the Community (Vertrag, 1957, pp. 29–35). As a sign of further formal importance of the sector in the context of the European integration, “an explicit deadline of two years was set” for the European Commission to come up with an actual formal design (Sedik et al., 2014, p. 11), later to be known as the EU’s Common Agricultural Policy. The latter, sometimes labeled as the EU’s first major policy (Ludlow, 2005), in its original version came into force in 1963 and may have owed much of its subsequent perseverance to the principle of financial solidarity absent entirely in the corresponding Eurasian agenda. Nevertheless, given that there is a section devoted to “regulation of common agrarian market” on the website of the Eurasian Economic Commission’s (EAEC) department

Functional markets of the EAEU: selected case studies  63 responsible for the Eurasian agroindustrial policy,3 one can assume that such a market may be either taken for granted, or understood in some vague terms. Indeed, one can hardly have a “common” market in the presence of “unequal economic conditions … due to the differences in the system of state regulation” of agriculture, and in the absence of the “infrastructure” facilitating such a system in the EAEU (Sidorskiy, n.d.). Just like in the case of delegating the issues of mutual markets and digitalization, or industrial and agroindustrial policies to the same EAEC departments, though, this apparent vagueness may well be another example of bureaucratic posturing and insufficient attention to detail when it comes to the EAEU’s functional markets. Otherwise, it is hard to explain why among 22 (!) consulting bodies created under the EAEC auspices the one on the functioning of internal markets is listed at the very bottom,4 and the related issue of barriers and exemptions comes only 18th in the list of 20 areas subject to coordination between the EAEU’s executive body and its business council.5 All of this is hardly problematic if the EAEU’s functional markets represent just an “additional agenda”, no matter how “rich”, to essentially a customs union (Vinokurov, 2017, p. 69), no matter how complex or politicized. Yet as demonstrated by the European experience, deep economic integration is impossible without common functional markets, and there is hardly any other pathway to them than through lengthy and painstaking deliberations. In the past the need for them was confirmed by numerous food-related disputes between Russia and its smaller Eurasian partners, especially Belarus. However, while in principle they always concerned the making of the EAEU’s functional markets, in most cases they were media-funneled to the verdicts of Rospotrebnadzor (Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing) or Rosselkhoznadzor (Federal Service for Veterinary and Phytosanitary Surveillance). These almighty watchdogs of the Russian consumer have been known for their politicized tendencies in the recent past: the former particularly with regard to the Baltic states, Georgia and Ukraine when it was headed by Gennady Onishchenko from 1996 to 2013, and the latter in dealings with Belarus championed by its head Sergey Dankvert in office since 2004 (Gutterman, 2013). Indeed, any discussion of the Eurasian common market for agricultural goods in the absence of a well-specified supranational mandate for it appears meaningless, especially as the EAEU’s FT made it clear that agricultural policy would be subject to coordination rather than unification or harmonization. Accordingly, the EAEC “powers” were limited to “monitoring”, “preparing recommendations”, and “assisting” [member states], which in practical terms led to a plethora of events, mostly of a consultative nature, and projects such as the “Map of the EAEU agroindustry” listing planned and ongoing “big” agro-investment projects undertaken by member states individually rather than jointly. How big and actually important in the Eurasian context such projects are can be deduced from the literal translation of the very first entry in the list: “Construction of a heating house and a new bloc of greenhouses on a total area of 14 hectares to grow fresh vegetables according to a plan of modernizing a greenhouse complex” in Bobruisk district of Belarus (Karta, 2021). There are 57 similar entries with the total declared investment volume of 6.6 bn USD (naught for Armenia, 1.1 bn for Belarus, 1.3 bn for Kazakhstan, 0.2 bn for Kyrgyzstan, and 3 See http://​www​.eurasiancommission​.org/​ru/​act/​prom​_i​_agroprom/​dep​_agroprom/​agr​_rynok/​ Pages/​default​.aspx. 29.11.2021. 4 See http://​www​.eurasiancommission​.org/​ru/​Pages/​consultative​.aspx. 23.11.2021. 5 See http://​www​.eurasiancommission​.org/​ru/​Pages/​consult​_sovet​.aspx. 23.11.2021.

64  The Elgar companion to the Eurasian Economic Union 4 bn for Russia), but there is no mention of where the money can come from, as there is generally no mention of commensurate financial mechanisms. Consequently, even if one agreed with Troitskiy (2020) that the EAEU’s “normative framework … is unusually coherent, with principles and norms elaborated and duly underpinned by specific rules and decision-making procedures”, without a common budget based on some form of financial solidarity there can hardly be common projects establishing the “infrastructure” mentioned in Sidorskiy’s prospectus. The EAEU’s functional markets in agriculture thus may be well positioned theoretically but remain poor in practice. Getting to the roots of this mismatch inevitably highlights the political, or more precisely geopolitical overhang. Notably, the unilateral decision by Russia to make selected food products the object of the early sanctions exchange with the West following its 2014 Crimea takeover was not welcomed by other EAEU partners (Troitskiy, 2020). Instead of boosting mutual trade of agriculture commodities it led to mutual accusations, reintroduction of border controls and proliferation of non-tariff restrictions. It would not be hard to imagine a full-blown trade war between Belarus and Russia by 2015, for example, over “especially notorious” trade disputes involving dairy products (2013) and even shrimps (2014), were it not for the Customs Union which excludes Trump-like tariff activism (Adarov, 2015, p. 23). As a result, in the EAEU’s first two years mutual trade in food products remained static at 6 bn USD annually, grew steadily between 2017 and 2019, but then got stuck again at around 8 bn USD since 2020. Nevertheless, while its share in total mutual trade has barely moved in the EAEU’s first five years between 2015 and 2019, it rose significantly in 2020 to match that of machinery and for the first time exceed that of fuels (see Figure 5.1). Should the observed trend of increasing absolute and relative volumes of mutual agro-trade continue, not only would it facilitate EAEU’s functional markets in agriculture, but it may also have positive political economy spillovers. To be sure, this part of the primary sector may lag its energy counterpart in export revenues, but not in employment or output contribution. Notably, the share of agriculture in the EAEU output averaged nearly 4% between 2015 and 2019, and in labor force – at 8%. For some members, particularly Armenia and Kyrgyz Republic, agriculture has played an even larger role: in the former it averaged 15% of GDP and 30% of employment, and in the latter – 13% and 24% respectively in the first five years since the establishment of the EAEU (see Figure 5.2). Nonetheless, a critical appraisal of the corresponding political economy background, particularly in its early period, inevitably limits the scope for optimism. Notably, as the economics of post-communism has been shaped in neo-liberal terms essentially based on the script of comparative advantage, agriculture was for the most part abandoned in the presence of more lucrative commodity alternatives. Apart from Belarus, since the mid-1990s ruled by predominantly agro-rooted elites, this could be politically acceptable across the EAEU as food imports soared first to fill the notorious Soviet-era deficits and later to compensate for the losses in domestic production against the background of simmering external debt issues (Yarashevich, 2013, p. 214). The sector moved into the spotlight only as a result of renewed geopolitical confrontation which coincided with the first years of the EAEU. Consequently, agriculture may have found itself on the forefront of Eurasian regionalism, but it still lacks the limelight as a reflection of the sector’s inferior treatment by the original post-communist reform script.

Functional markets of the EAEU: selected case studies  65  

Source: EAEC.

Figure 5.1

EAEU’s mutual trade in agriculture commodities in 2015–2020

Sources: ILO; UNCTAD.

Figure 5.2

Role of agriculture in EAEU’s output and employment in 2015–2019

66  The Elgar companion to the Eurasian Economic Union Seemingly unproblematic for a customs union, deep economic integration formally aspired to by the EAEU may require a different approach not dissimilar to that adopted in the EU. Based on the principles of supranationalism and solidarity, in the beginning it ostensibly aimed at pooling resources for neutralizing the primary sector issues to foster industrial development. Among other things, it facilitated progression of complexity and value creation in both internal and external trade, theoretically grounded on the principle of increasing returns underpinning the logic of industrialization that secured modern day Western affluence (Reinert, 1995). The structural changes in the EAEU’s mutual trade, notably rising, even if only slowly, shares of agricultural and manufactured goods in it, suggest that the bloc may be getting on its promised development track, but without a detailed bottom-up elaboration of the workings of the agricultural functional markets their evolution is unlikely to be sustainable.

5.3

EAEU’S FUNCTIONAL MARKETS IN THE MAKING: ENERGY GOODS

As noted by Libman (2006) long before the EAEU’s takeoff, due to “the great role played by the power industry”, i.e. energy sector, in the region, “energy projects must form the core of integration initiatives in the post-Soviet (and Eurasian) space” (p. 506). One and a half decades later, though, the progress of the Eurasian energy integration is reminiscent of the cart’s fate in the tale by the Russian fabulist Ivan Krylov about crayfish, swan and pike: not much has changed. Just like with agriculture, the principles of mutual energy exchange in the EAEU were laid out in Articles 28 and 29 of its Founding Treaty that proscribe tariff and non-tariff restrictions in principle yet provide space for exemptions (Treaty, 2014, pp. 27–28). Thus, almost immediately after the launch of the EAEU in 2015, energy, an area which formed the backbone of the integration process in Europe, had been effectively sidelined from the respective Eurasian agenda. Notably, in December 2017 the EAEU’s top body, the Supreme Eurasian Economic Council, agreed on a program of establishing common oil and petroleum markets by 1 January 2025 in two roughly equal stages. The first one, from 2018 to 2021/2022, envisaged “the establishment of organizational and methodological foundation” for such markets, notably through “harmonization” of the appropriate legislation, while the second one, from 2021/2022 to 2025, was dedicated to preparing “a project of an international treaty” establishing common oil and petroleum markets in the EAEU (Reshenie, 2017, p. 7). One year later, an analogous program concerning natural gas market was approved, with similar yet more detailed timescales (Reshenie, 2018, pp. 9–11). Given the political and even geopolitical importance of hydrocarbons, there might be nothing wrong in giving such gracious, by post-Soviet standards, preparation periods. Indeed, a much tighter timescale with a common electric power market, agreed on as early as in December 2016, has so far failed to work out in practice. It implied less than three years for the whole process of harmonizing existing legislation and preparing a new treaty by 1 July 2019, but according to the EAEC’s energy department, the preparatory work towards the EAEU’s first designated energy market was completed only by Armenia and Belarus (Poruchenie, 2020). Needless to say, all three programs were based on the provisions of the EAEU’s Founding Treaty. Energy has a dedicated section, no. XX, running six articles on issues of general coop-

Functional markets of the EAEU: selected case studies  67 eration in the sphere (no. 79); planning of hydrocarbon supplies (no. 80); intended common markets of electric power (no. 81 and 82), natural gas (no. 83), and oil and petroleum products (no. 84). The section’s final article (no. 85) concerns the role of the Eurasian Commission (Treaty, 2014, p. 90), and by limiting its mandate to mere “monitoring” with just one brief sentence it highlights the limited scope for supranationalism in the EAEU as the key difference from the EU. To be sure, the latter was firmly grounded on Schuman’s supranational imperatives with respect to coal and steel (Vernon, 1953, p. 183), perhaps as important at the time as hydrocarbons are at present. Overall, by founding the European Community of Steel and Coal five years before the 1957 Treaties of Rome establishing the European Atomic Energy Community and the European Economic Community, it is obvious that at least formally the primary sector in general and energy in particular were given their due role in the underlying structure of the European Communities as a prospective supranational project. In another contrast to the EAEU, which was preceded by the Customs Union effectively established in just three years (2010–2012), it took over a decade for the European Communities to establish their own one, following the Spaak Report’s recommendations that the process ought to take twelve years and be divided into three stages of equal length (Dinan, 2004, p. 74). Thus, from its original specification in the second part of the Rome Treaty signed in March 1957, the Customs Union of the European Economic Community was not completed until July 1968, eighteen months ahead of schedule (Dinan, 2004, p. 336). Admittedly, energy issues do get some more coverage in the multitude of annexes to the EAEU’s Founding Treaty, but far less scrupulously than, for instance, anti-dumping measures (Annex 8 of 102 pages), or trade in services, including financial ones (Protocols 16 and 17 also totaling 102 pages). Notably, there are three Protocols (21, 22 and 23) respectively addressing electric power, natural gas, and oil and petroleum products exchange in the EAEU, but even taken together their volume is dwarfed by, for instance, Protocol 24 on coordination of transport provision (Treaty, 2014). One could argue that the aforementioned nuances would not matter as much as the contents, had it not been for the obvious lack of progress with institutionalizing common energy markets in the EAEU. On the one hand, much of the available literature in English devoted to post-communist energy vicissitudes tends to explain them in predominantly political terms, by pointing at Russia’s alleged interest to retain regional domination through the use of its vast resources and infrastructure partly inherited and partly updated since the break-up of the Soviet Union more than three decades ago. It is obvious, for example, from the very title of the latest book by Balmaceda (2021) from New York’s Columbia University, who has worked on the topic since the mid-1990s (p. 4). Likewise, Sagramoso (2020) from King’s College London asserted that while pursuing post-Soviet integration in the form of the EAEU Russia “was ready to use a vast array” of both “soft” and “hard power instruments at its disposal in order to establish a sphere of influence or neo-empire in Eurasia” (p. 270). The “soft” ones reportedly included “subsidies and lower energy prices to lure” hesitant CIS (the Commonwealth of Independent States) candidates into deeper integration, turned into “hard” coercive mode when the latter dragged along (Sagramoso, 2020, p. 269). Securitization, i.e. considering energy an existential security concern, was brought forward by Wilson (2019) in a neat comparative perspective as a general theoretical basis for Russia’s political use of its energy (pp. 120–121).

68  The Elgar companion to the Eurasian Economic Union On the other hand, some authors called for a more balanced view of energy politics involving Russia, by pointing at either their complex geopolitical context, particularly the issue of power rebalancing on the continent after the Cold War (Siddi, 2018), or arguably no less salient post-communist political economy background (Yarashevich, 2019). Highlighting the issue of subsidies in “energy pricing mechanisms” prevailing in the EAEU, in her pioneering inquiry into prospects of the EAEU energy integration Garanina (2021) claimed that while initially it was hampered by the “affirmation of independent politics in the newly sovereign republics”, a key challenge at present is “a transfer of sovereignty from the national level to supranational institutions” (p. 109). The latter might have been “one of the biggest premises of the Eurasian integration”, but having reviewed its institutional arrangements and coordination tensions Roberts and Moshes (2016) were among the first to underscore a discrepancy between EAEU’s supranational intentions and sovereign realities. The primacy of energy for the Eurasian integration stems not only from the European theoretical “coats” and historical experience, but also from the fact that Russia, the EAEU’s largest and leading member, has been one of the world’s leading energy producers. As far as electric power generation is concerned, with 4.1% of global output in 2021 it ranked fourth after China (30%), US (15.5%), and India (6%). With 12.2% of global crude oil production in 2021 it shared the second position with Saudi Arabia, preceded only by the US with 18.5% of global total. Likewise, Russia ranked second in global natural gas output, with the global share of 17.4% in 2021 surpassed only by that of the US (23.1%) (British Petroleum, 2022). By contrast to the US, however, the bulk of Russia’s hydrocarbon production goes abroad: the level of domestic natural gas consumption in 2021 stood at 68% vs 89% in the US, and despite its top global ranking in the same year the latter remained a net importer of crude, contrary to Russia which exported half of its output (British Petroleum, 2022). Nevertheless, while thanks to fracking the volume of US fuel exports has been steadily catching up with that of Russia, at 240 and 275 bn USD respectively in 2021, relative to GDP it remained around 1% for the former in contrast to over 15% for the latter (UNCTADstat, 2023). Furthermore, while in mature Western agglomerations such as the EU or USMCA (former NAFTA) the share of fuel in mutual exports has been minor, with the bulk accounted for by manufactures, particularly machinery, in the EAEU energy goods6 have until recently constituted the biggest portion of internal merchandise exchange. Notably, in the period between 2015 and 2020 the share of SITC 3 section averaged almost a quarter of the latter, or one third higher than the 17.6% average share of machinery from SITC 7 group. Dynamically, though, the share of fuels in the EAEU mutual trade has been on the descent: it nearly halved from 30% in 2015 to just 17% in 2020, and in the same year was overtaken by machinery’s share for the first time in the relatively brief history of the EAEU (see Table 5.1).

According to SITC (4th revision), they are covered in section 3 “Mineral fuels, lubricants and related materials”. It consists of four divisions: 32 “Coal, coke and briquettes”, 33 “Petroleum, petroleum products and related materials”, 34 “Gas, natural and manufactured”, and 35 “Electric current”. 6

Functional markets of the EAEU: selected case studies  69 Table 5.1

Selected indicators of the EAEU’s mutual trade, 2015–2020

 

2015

2016

2017

2018

2019

2020

Average

Total mutual merchandise trade volume,

45.6

43.0

54.7

60.3

61.6

55.1

53.4

Fuels (SITC 3) share, %

29.9

23.1

23.8

25.0

21.5

16.9

23.4

Inc. coal (32)

1.1

0.8

1.0

1.1

1.3

1.1

1.1

– oil (33)

19.9

14.0

15.5

17.2

13.2

9.2

14.8

– natural gas (34)

8.4

7.7

6.9

6.4

6.9

6.4

7.1

– electric power (35)

0.5

0.5

0.5

0.2

0.1

0.1

0.3

Manufactured goods (SITC 5-8 exc.66&68)

43.5

47.0

48.8

48.7

50.1

51.7

48.3

18.1

18.7

18.8

17.6

bn USD

share, % Machinery (SITC 7) share, % 15.7 16.8 17.6 MEMORANDA: selected SITC sections in mutual trade of the EU/USMCA, % SITC 3

–

4/9

5/11

5/13

5/12

4/10

5/11

SITC 5-8 (exc.667&668)

–

77/73

77/72

77/70

77/71

77/70

77/71

SITC 7

–

37/47

37/46

36/45

37/46

37/45

37/46

Sources: EAEC; UNCTAD.

It is all but strange then that despite its declining role in the EAEU mutual trade energy has effectively fallen out, even if temporarily by formal assurances, from the initial common market provisions of its Founding Treaty, perhaps a reflection of its historical position in the legal framework of the post-Soviet free trade arrangements (Dodsworth et al., 2002; Dragneva and de Kort, 2007, p. 236). Among commonly invoked reasons for this one could count the special role in budget revenues, infrastructure and logistics complexities, as well as involvement of natural monopolies and quasi-monopolies. Indeed, hydrocarbon-related revenues in Russia’s federal budget averaged 38.3% between 2017 and 2020, according to calculations made by the country’s official statisticians (RBK, 2021). Federal budget is only a part of a consolidated one, though, and for the whole Russian economy hydrocarbons feature far less prominently: 15% in 2020 according to national statistics (Maksimov, 2021). Moreover, World Bank data suggest that Russia’s hydrocarbon windfall may be even less significant if one considers production costs: in 2020 oil and gas rents stood at just 8.4% of GDP, or less than a half of the corresponding Saudi level (18.1%) (DataBank, 2023). If one still accepted some complexity of hydrocarbons in the EAEU, justifying their special trade terms and unhurried incorporation in the overall integration architecture, they can hardly be more complex than electric power, set to constitute the first common energy market yet in 2019. One could find no official explanation why this could not happen in due time for a commodity taking just 0.3% of the EAEU’s total mutual trade on average since 2015, or less than a third of the corresponding share of coal not even considered as a common market candidate (see Table 5.1). The state of affairs whereby the EAEU may well be an energy superpower globally but fails to live up to its own commitments by providing unhindered internal access to its vast energy resources obviously tests the whole viability of the Eurasian project. For regardless of the European or other experience, it is logical that without liberating mutual exchange of energy there will always be grounds for mutual reprimands like those between Belarus and

70  The Elgar companion to the Eurasian Economic Union Russia despite their closest ties within not only the EAEU but also the Union State7 framework (Sagramoso, 2020, pp. 167–171, 253, 290–291). It is also certain that as long as the EAEU energy debates, both theoretical and practical, remain dominated by the double-S overhang of “securitization” (Wilson, 2019) and “subsidization” (Garanina, 2021, pp. 114–118) concerns, the metaphoric “cart” will hardly move far from its place set in the early 1990s.

5.4

EAEU’S FUNCTIONAL MARKETS IN THE MAKING: MEDICINAL AND MEDICAL PRODUCTS

In late December 2014, just one week before the formal start of the EAEU, at a meeting of the Supreme Eurasian Economic Council in Moscow it was decided that common markets for medical and medicinal products would become operational from 1 January 2016 (Pivovar, 2014). Effectively set to become the first functional markets of the new Eurasian initiative, they should have paved the way forward to common markets in energy and financial services which had been agreed upon during the same top-level Christmas encounter. In reality, however, it was the corresponding agreements rather than the common markets envisaged by them which became operational from the early 2016. The Agreement on common principles and rules for the circulation of medical devices (medical products and medical equipment) in the framework of the Eurasian Economic Union came into force on 2 February, and ten days later – the Agreement on common principles and rules for the circulation of medicinal products within the EAEU (Legal Portal, 2023). To be fair and precise, both agreements have a very general nature and by and large state the goal of creating corresponding common markets, and thus should not be the viewed as some sort of testament to their actuality alluded to in formal media reports. The actual state of affairs with regard to common markets in medicinal and medical products within the EAEU has been neatly summed up by the Association of the Russian pharmaceutical manufacturers ahead of its spring 2021 roundtable discussion in Moscow: Common rules for the circulation of medicinal products became operational since 2017. An information base of the Union’s pharmaceutical markets was created in 2018. The reregistration of medicines according to uniform rules has begun in the EAEU since 2019, with their uniform marking to follow … Starting from January 2021 pharmaceutical producers would have to register their products only in accordance with the EAEU requirements, and by 2025 rules for manufacture and sales of pharmaceuticals and medicinal products on the territory of Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan would have to be fully unified. (ARFP, 2021)

As noteworthy as all these achievements may seem, they hardly reflect fully-fledged common markets, and a more structured overview of their evolution was put forward by Viktor Nazarenko, the member of the Eurasian Economic Commission responsible for technical regulation. According to him, the first integration stage (2014–2016) implied adopting common principles and rules for the workings of national regulators; the second and current one

7 The Union State of Belarus and Russia is a regionalist integration project based on the Treaty Establishing the Union State signed in Moscow on 8 December 1999, and preceded by the Charter of the Union of Belarus and Russia signed 23 May 1997, and by the Treaty on the Formation of the Community of Russia and Belarus signed 2 April 1996 (Preiherman, 2019).

Functional markets of the EAEU: selected case studies  71 (2017–2024) is aimed at tuning in national processes based on the accumulated experience; and the final stage (2025–2029) envisages replacement of national regulatory processes by a single EAEU one in the framework and spirit of the original 2014 Agreement (Bateneva, 2022). From a critical perspective, though, such an explanation merely conceals a failure to agree on the workings of the common pharmaceutical market while trying to keep an upbeat formal stance. Adopting a common pharmacopeia, or a reference work for medicinal specifications, in 2020–2021 may be considered the most visible practical outcome of the aforementioned early stages. It is symbolic because as a Russian-language supranational register it effectively replaced the retired but also formally supranational pharmacopeia of the Soviet Union, which was based on the Russian pharmacopeia first introduced in 1765 in Latin. As such, by breaking the European tendencies of pharmacopeial developments in the EAEU smaller members, which as independent states sought to harmonize their national registers with that of the European Union adopted in 1967, the common pharmaceutical reference book reestablished the Soviet-Russian tradition. Another practical outcome of common medicinal market evolution in the EAEU reportedly concerns progressive use of the respective Union’s law. Notably, whereas in 2019 the number of registration and GMP (good manufacturing practice) certificates issued according to the latter was just 14 each, by late 2022 it soared to nearly 1,400 and 900 respectively (Bateneva, 2022). It should be noted, however, that conceptually the EAEU GMP rules derive from those of the EU, with no corresponding standards of its own (most likely due to their lack in the Soviet period) prompting Russia to adopt European GMP principles already in 1998 (Ashpina, 2003–2004). Given the escalation of geopolitical tensions over Ukraine since early 2022, though, it is not clear how sustainable the GMP base of the EAEU common regulations regarding medicinal manufacturing turn out to be in the medium to long term. A further progression of the latter, driven by import substitution, looks far more obvious. At present medicinal production in the EAEU is relatively small judging by the data which could only be obtained from respective national statistics. Notably, in 2021 it stood at just 25 million USD in Armenia, 766 million USD in Belarus, 475 million USD in Kazakhstan, 11.5 million USD in Kyrgyzstan, and 12.6 billion USD in Russia, or 93% of total 13.6 billion USD. The overall volume of medicinal market in the EAEU was estimated to be much bigger than that, at about 33 billion USD in 2021, but is still small compared to the 1.4 trillion USD global one, reflecting more general macroeconomic proportions (Mikulic, 2022). As far as mutual medicinal trade in concerned, despite impressive growth since the EAEU inception its volume has yet to reach a symbolic 1 billion USD, standing for just 1.1% of total mutual merchandise trade and barely comparable to the 16 billion USD of medicinal imports in 2021 (see Table 5.2).

72  The Elgar companion to the Eurasian Economic Union Table 5.2

Selected indicators of the EAEU’s medicinal market, 2014–2021

 

2014

2015

2016

2017

2018

2019

2020

2021

Mutual trade volume, m USD

360

336

404

477

516

613

682

828

Index, %

100

93

112

133

143

170

189

230

Imports, bn USD

14.7

10.5

10.3

12.5

12.3

15.9

13.1

16.1

Index, %

100

71

70

85

84

108

89

110

Production in Belarus, m USD

502

532

502

589

614

653

664

766

Production in Kazakhstan, m USD

212

168

138

222

228

242

344

475

Production in Russia, m USD

6572

5646

6643

8583

8864

9885

12607

–

Production in EAEU-3, bn USD

7.3

6.3

7.3

9.4

9.7

10.8

13.6

–

Index, %

100

87

100

129

133

148

187

–

Sources: EAEC and national statistics.

As far as the EAEU market of medical equipment is concerned, getting even national statistics on it turned out to be tricky primarily due to the lack of easily accessible and consistent manufacturing breakdowns across all member states, as well as a lack of respective trade data habitually provided by the Eurasian Economic Commission. Consequently, the figures on trade in medical equipment in the EAEU were derived from the UNCTADStat, notably in SITC categories 774 (Electrodiagnostic apparatus for medical, surgical, dental or veterinary purposes) and 872 (Instruments and appliances for medical, surgical, dental or veterinary purposes), while production statistics was only available for Russia (see Table 5.3). Table 5.3

Selected indicators of the EAEU’s medical equipment market, 2014–2021

  Mutual trade volume (SITC 774+872), m

2014

2015

2016

2017

2018

2019

2020

2021

49

43

90

96

99

128

175

179 362

USD Index, %

100

88

182

194

200

259

355

Imports (SITC 774+872), bn USD

3.4

2.2

2.5

3.2

2.9

3.4

4.4

4.2

Index, %

100

64

75

94

84

99

130

125

Production in Russia, m USD

1535

861

557

693

604

751

1276

–

Index, %

100

56

36

45

39

49

83

–

Sources: Rosstat and UNCTADStat.

Closer economic integration in the framework of the EAEU has evidently facilitated mutual medical equipment exchange among its members, which doubled by 2016 and more than tripled in the next five years. However, despite this impressive growth and evident stagnation of respective imports, the latter continue to dwarf the mutual trade, in 2021 exceeding it by a whopping 24 times. Likewise, assessing the volume and dynamics of medical equipment production in Russia, the EAEU dominant member, it becomes clear that domestic supply can hardly meet the needs of the bloc’s medical sectors, especially after the start of the COVID-19 pandemic in 2020. Hence, just as with the medicinal market, the EAEU’s market in medical equipment is heavily import-dependent and may be at an even earlier stage of its effective mutualization given the overall demise of original machine-building in the region following the Soviet Union collapse in 1991.

Functional markets of the EAEU: selected case studies  73 Nevertheless, by contrast to ambiguity with further regulatory anchoring, prospects for both internal production and mutual trade in medicines, if not so much in medical equipment, look far more certain. Due to harsh economic sanctions on Russia and its ally Belarus over their stance on Ukraine these two key EAEU members are left with no choice but to accelerate substituting all sorts of medical and medicinal imports. The eventual success of this externally-driven import substitution is uncertain, though, as both sectors are extremely technologically intense and international, requiring a lot of appropriate research and development organization and funding. The latter, at 0.55% of GDP in Belarus and 1.1% in Russia compared to 3% in OECD in 2020, is obviously in short supply in both countries, just as in the EAEU at large (DataBank, 2023). Consequently, positive dynamics in this indicator may be the ultimate gauge of the bloc’s chances for establishing common markets in medicinal and medical products based more on mutual exchange of regional products rather than single regulations of ever more sophisticated life-critical imports.

5.5 CONCLUSION To be sure, the EAEU may be still too young to be judged by the measures of more seasoned regionalist projects, particularly those in the West. Its “birth trauma” resulting from Ukraine’s crisis and impairing its “liberal” ideological foundations should not be ignored either (Troitskiy, 2020). By contrast to the Commonwealth of Independent States and aborted customs unions of the 1990s, the current form of the Eurasian regionalism was negotiated in relatively favorable economic settings of 2009–2012 preceding Putin’s campaign to return to the Kremlin after Medvedev’s 2008–2011 “interim” presidency, when the price of oil, Russia’s key export, soared to unprecedented levels. Early tensions over Ukraine following its European push and Russia’s takeover of Crimea, rolled back the EAEU’s initial “liberalism”, including in mutual trade, as customs controls were reintroduced on some of the Union’s inland borders to check the imports of agricultural products sanctioned by Russia in response to initial Western Ukraine-related sanctions. Then came the pandemic with even more restrictions, this time affecting mostly the free movement of labor which has been considered one of the EAEU’s early success stories. With a new wave of sanctions exchange following the unprecedented escalation of the Ukraine conflict it is increasingly clear that the early liberal heydays of the Eurasian project are unlikely to return in the foreseeable future. By contrast, the EAEU seems set to become a fortress isolated from the global economy if one gets to the roots of the current sanctions regime imposed on its core members, Russia and Belarus, by the West. It may be not a particularly united fortress either, as despite a formal allegiance to deeper integration the EAEU seems to “primarily aim at preserving the sovereign interests of its member states” (Aseeva and Górski, 2021, p. 2). Time and again this was demonstrated in numerous disputes not only between Russia and its smaller partners, including Belarus, but also between Kazakhstan and Kyrgyzstan, and most recently between Armenia and its four fellows over Nagorny Karabakh. In theoretical terms, this means that rather than switching to a fast supranational lane the Moscow-led bloc faces the challenge of being stuck in the slow lane of intergovernmentalism typical for most other regionalist projects. Nevertheless, certain institutional features of the EAEU, namely the existence of several supranational bodies and a common budget, albeit with limited powers and scope, as well as common post-communist context and strong gravitational pull of Russia not only in terms

74  The Elgar companion to the Eurasian Economic Union of market size and energy “chains”, but culture, language, religion, security and many other factors, call for a more nuanced theoretical appraisal of the Eurasian experience. In other words, it may be a case of neither neofunctionalism or supranationalism, nor of pure intergovernmentalism, but rather a hybrid regionalist product based on as much geopolitics as economics. Here one could agree with Diesen (2021) that the EAEU “should be conceptualized as a geoeconomic bloc endeavoring to develop … collective bargaining power to counter asymmetrical interdependence with the EU and China” (p. 20). Moreover, taking into account the US role in the Ukraine conflict, particularly its determined global push for a coalition against any Russian influence, the EAEU risks turning into not just a protectionist fortress forced to capital and technologically lacking import-substitution, but another replica of short-lived integration efforts of the early post-communist era. There is certainly no need to benchmark the EAEU against the EU, but it seems important to note that apart from the benevolent geopolitical anxieties of the immediate post-war period the latter’s supranational drive was also underpinned by the logic of increasing returns already mentioned in this contribution. Essentially, it is about economies of scale and market size: the more one produces (not excavates) to a bigger market, the bigger and more sustained one’s profits are, allowing to maintain competitiveness as long as they are reinvested in, inter alia, technological upgrades and new markets. The allegiance to this principle was obviously at the heart of the European project as it started from the primary sector concerns which had to be settled first in order to pave the way for more intense industrial cooperation in the region. The very evolution of this regionalist project from the 1950 Schuman Declaration to the present-day unity of 27 Europe’s nations, which has so far managed to withstand both enlargements and Brexit, in addition to numerous economic and political crises, seems to verify the virtue of its integration algorithm. It may be hard to avoid using the latter as the natural reference point for five post-communist nations that opted for their own regionalist alternative, taking into account the unfortunate outcomes of their previous experiences under communism. Notably, settling energy issues in the EAEU seems instrumental not only for breaking away from external commodity dependence choking robust internal manufacturing value chains, a powertrain of any sustainable regionalist endeavor, but also as a principal switch from decreasing to increasing returns in the bloc’s political economy fundamentals. While this might be suspected as a U-turn from the path of post-communist reforms, in fact such a switch is hardly possible without further progress with greater liberalization of domestic primary sectors in all EAEU member states, especially the energy ones in Kazakhstan and Russia (Garanina, 2021, pp. 118–119). Eurasian functional markets, particularly those in manufacturing industries, are then likely to benefit not so much from greater supranationalism or liberalization per se, but from their amalgamation in a strategic integration roadmap prioritizing reindustrialization of the bloc as a key factor in its development. It is not clear, though, that a possible solution here could come from more formal arrangements, as the EAEU may already have too many of them (Libman, 2007, p. 411). The Union State of Belarus and Russia is just one example here. Getting to the roots of the apparent inefficiency of this and other post-Soviet top-level boosters of economic integration in the region requires a profound understanding of the overall neo-liberal political economy of its transformation. For instance, much of the post-Soviet energy sector was effectively excluded from frequently hectic post-Soviet institutional arrangements not least as a result of lobbying by oligarchs who emerged in murky privatizations of the 1990s (Hellman, 1998) and might have

Functional markets of the EAEU: selected case studies  75 seen it easier to secure their commodity rents within national rather than regional frameworks. This may well reflect the logic of diminishing return formulated by Alfred Marshall (2013, p. 125) in the late nineteenth century, but is hardly compatible with the EAEU’s twenty-first century objectives of sustainable development, modernization and competitiveness. The advancing dynamics of mutual trade in medicinal and medical goods since 2015 confirm that the Eurasian industrial sectors seem well prepared for a new stage of integration based on the positive logic of increasing returns even if for many it seems doomed due to numerous internal and external constraints. Historical experience, particularly the one related to Europe, shows that there is hardly any strategic alternative to sustainable integration as long as it is based on industrial vision and political fortitude.

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6. Mutual foreign direct investments in the EAEU Anton Malakhov and Evgeny Vinokurov

6.1 INTRODUCTION Mutual foreign direct investments (FDIs) deserve special attention while studying regional economic integration processes. The reasons are the following. First, labour flows as well as trade in goods and services are much more volatile as they are largely associated with changes in GDP and exchange rates.1 At the same time, FDIs are ‘stickier’: once implemented, they hold regional cooperation together for a longer time. The presence of FDIs shows long-term trust and commitment to cooperation (or lack thereof). Second, FDIs very often generate flows of trade in goods and services, not vice versa. The ties created by direct investment take longer to develop but they are more durable. Cross-border economic linkages in the EAEU are mainly built by and around Russia. Russia is the main trading partner of the countries in the region, the largest recipient of labour resources, and the main cross-border investor; therefore, the state of the Russian economy greatly affects cooperative processes in the region. Investment between other EAEU countries is much smaller, with some notable exceptions. There are several trends associated with the investment flows in Eurasia, which we will discuss in detail later in the chapter. There are new investment links between distant countries (such as Belarus–Kazakhstan and Belarus–Armenia bilateral investment cooperation); a gradual increase in investments by small and medium enterprises supporting industry diversification; and faster growth of FDI in greenfield projects and by private investors. The structure of this chapter is as follows. We start with reviewing the small literature on mutual investments in the EAEU. Then follows a review of data and methodology, in which a tricky issue concerns correctly assessing mutual investments in the region, given the very widespread use of offshore vehicles. A detailed analysis of mutual investments in the region follows, including the scope, development, geographical and sectoral structure of mutual investments, as well as the largest investment projects in the region. Finally, we present an outlook for changes in mutual investments over the next several years under various assumptions, considering prevailing trends in mutual investments and exogenous factors.

6.2

LITERATURE REVIEW

Post-Soviet Eurasia is a region where the development of investment cooperation appears to be likely due to a number of conditions. Vinokurov (2018) argues that due to the region’s shared historical and economic past and the countries’ geographic and linguistic proximity, the corporate sector is highly aware of the specifics of doing business in EAEU member



1

On the trade dynamics in the EAEU, see Chapter 4 of this Companion.

79

80  The Elgar companion to the Eurasian Economic Union states. Moreover, the EAEU countries have advanced a common regulatory environment, in particular a common set of technical regulations, which is important for FDIs in industry. This should foster FDI flows. In total, intra-regional cooperation is an outcome of an interplay of two interrelated sets of factors: corporate interests and policies of international organizations (Heifetz and Libman, 2008). Corporate cross-border linkages (bottom-up) could create conditions for formal international cooperation (top-down). Economic cooperation within the EAEU has followed the same logic. The role of Russia as the key investor in the region is crucial. Vahtra et al. (2005) made the first attempts to study Russian FDI, showing that Russian enterprises invested abroad for various corporate strategic reasons. These included strengthening market positions; expanding markets overseas; internalizing control over value chains; accessing natural resources, including acquisition of strategic assets to improve competitiveness; and the desire to diversify their activities to reduce dependence on the domestic business environment. Outward FDI has contributed to increasing the competitiveness of Russian enterprises. Foreign investment is likely to be broadly linked to foreign policy (Gertz, 2016; Krasner, 1978). Russia dramatically increased its outward FDI during the 2000s. Investment growth during 2000–2013 made the Russian Federation one of the largest among developing economies. However, during the 2010s, Russia’s outward FDI (OFDI) growth rate declined due to a number of global factors such as the economic downturn (Ucal et al., 2010) and the international initiative to end harmful tax practices (Saguna and Radu, 2015). Russia’s OFDI was also subject to economic sanctions from the West introduced in 2014, making the business environment in the country more unpredictable and turbulent (Laine and Galkina, 2017) and private investment and FDI more dependent on government support. Libman et al. (2022) arrived at the conclusion that a substantial share of Russian firms, mostly large state-owned firms, prefer risky investment climates, reflecting their rent-seeking strategies. State-owned firms, which play a key role in the Russian economy, generally prefer to invest in countries with weak institutions and a correspondingly high degree of political risk. Russia deploys state-owned firms to extend its influence and exerts that influence to make its investments profitable. As already mentioned, the large-scale growth of FDI by the majority of Russian transnational corporations (TNCs) began approximately in 2004–2008 (Kuznetsov, 2016). Subsequently, a number of companies have grown from regional to global in scope. For example, in 2004 Vimpelcom started expanding in the Commonwealth of Independent States (CIS); in 2008 it entered the other markets of the former socialist bloc and Southeast Asia; and in 2011 it began global expansion, including to Europe, Arab countries, and Africa. Russian investors changed their strategies amid structural changes of the national economy of their country of origin. Kalotay and Sulstarova (2010) highlight these shifts. In the early 1990s, the countries involved were represented by mostly privately owned TNCs, seeking ‘safety nets’ abroad. In 2010, state-owned or -influenced TNCs dominated Russian capital exports, motivated by a desire to control the value chain of their products. A fundamental problem of studying FDI, however, is lack of data, which we will discuss in the next section in greater detail. The Eurasian Development Bank (EDB) is an established leader in researching and monitoring mutual direct investment stock in the post-Soviet Eurasia for more than ten years. The bank leads a regional FDIs’ database and publishes yearly reports on the matter (e.g., EDB, 2012, 2013a, 2013b, 2014), based on scrutinizing hundreds

Mutual foreign direct investments in the EAEU  81 of sources including the press and corporate reports. The EDB also published an analysis of methodological issues of maintaining and developing a database of direct investments (EDB, 2013a). In 2022, the analysis added investments between CIS countries and several non-CIS countries, including China, Iran, and Arab states (Kuznetsov and Vinokurov, 2022). The EAEU’s mutual investments have a number of advantages that are prerequisites for sustainable development of their target countries and countries of origin. In particular, Heifetz and Libman (2008) show that industrial and scientific cooperation in the region has a substantial foundation, due to the unified industrial and technical infrastructure left after the collapse of the USSR. The success of economic cooperation in the EAEU is visible in its ability to ‘absorb’ negative trends. For example, since 2008, mutual FDI stock in EAEU member states has been more stable than in the CIS as a whole (Vinokurov, 2018). However, there are a number of factors that restrain mutual investments in the EAEU, notably protectionist policies in the EAEU countries that limit investments in strategic economic sectors, and the lack of a proactive policy at the EAEU level encouraging capital exports (Kvashnin, 2016). Sanctions against Russia, which started in 2014 and intensified in 2022, have also worsened the financial situation of Russian TNCs and their outward investing opportunities.

6.3

DATA AND METHODOLOGY

As already discussed in the previous section, there are different sources of FDI data. Central (national) banks provide official data of FDI flows and stocks. International organizations, including the IMF and UNCTAD, provide a global view of foreign direct investments. According to UNCTAD’s (2022) report, reflecting the situation as of 2021, the EAEU countries are relevant participants in international capital turnover. The EAEU’s FDI inward stock totalled $698.8 billion in 2021 or 1.5% of the total world amount (see Table 6.1); FDI outward stock is somewhat less and totalled $417.4 billion or 1.0% of the total world amount. Between 2000 and 2010, FDI stocks of the EAEU countries in both directions grew rapidly – 13- and 18-fold, respectively. However, after 2010, this growth slowed down in comparison to the pace of global growth. Table 6.1

FDI stock of EAEU member states, $ millions 2000

FDI inward stock 2010

2021

2000

FDI outward stock 2010

Armenia

513

4,405

5,631

–

150

519

Belarus

1,306

9,904

15,165

24

205

1,358

Kazakhstan

10,078

82,648

151,953

16

16,212

15,666

Kyrgyzstan

432

1,698

4,233

33

2

610

29,738

464,228

521,876

19,211

336,355

399,313

Russia

2021

EAEU

42,067

562,883

698,858

19,284

352,924

417,466

World

7,377,201

19,907,143

45,448,812

7,408,902

20,471,257

41,798,485

Source: UNCTAD (2022), authors’ calculations.

82  The Elgar companion to the Eurasian Economic Union Central (national) banks provide data about the industrial and geographical structure of investments in their national economies. However, a tricky issue concerns correctly assessing mutual investments in the region, given the very widespread use of offshore vehicles. Hence, research approaches, which allow correctly noting the final beneficiary of a project, generally provide a better assessment of corporate flows than official data. (That said, they do not substitute for the aggregate data provided by central banks since the latter also include small-scale investment, such as physical persons buying residential property, etc.) For example, Central Bank of Russia’s data of FDI from Russia totalled $9,553 million in 2021, whereas, according to EDB data (which will be discussed in what follows and which are based on these alternative approaches), these FDI totalled $20,450 million (see Table 6.2). The difference is related to the large role of offshore vehicles in the region. Half of FDI inflows and outflows in Russia are dependent on offshore countries. In 2021, their shares in inward FDI stock of Russia were the following: Cyprus – 33.3%, Bermuda – 12.0%, Bahamas – 4.8%. The share of Cyprus in outward FDI stock was 54.4% (IMF, 2021). Lacking adequate quantitative data on mutual investments, it would be difficult to assess cooperation of local companies (Vinokurov and Libman, 2012). In order to eliminate this flaw and have a complete picture of investment flows in the region, the EDB maintains its own database of mutual investments in the CIS and publishes annually the Monitoring of Mutual Investments (MMI) database. There are reasons to argue that this EDB mutual investments data is much more accurate than officially registered figures. The MMI contains data on the scope, development, geographical, and sectoral structure of mutual FDI stock in the CIS. The EDB developed the methodology during the implementation of several projects in the 2010s and improved it subsequently. The EDB generates FDI data ‘bottom-up’, based on publicly available sources such as corporate statements and other primary information. Detailed work with corporate reports and other company information, as well as news reports in the media and other sources, makes it possible to obtain a more extensive list of direct regional investors than one official source of information from central banks, thereby overcoming a number of disadvantages of the accounting for investment projects carried out by central banks or state statistical agencies. The EDB’s assessment of mutual investments mainly follows the recommendations of the OECD (OECD, 2009); however, methods of indirect assessment of FDI are somewhat more widely used. This is particularly relevant for countries with underdeveloped stock markets for the assessment of profits reinvested. In some cases, information about similar transactions of other firms is used. This is due to the relatively low information transparency of investor companies in the post-Soviet countries and the lack of information about the value of assets. A distinctive feature of the EDB MMI is its accounting of investments at the place of actual localization of assets. Central banks usually assess the FDI geography based on the first recipient country of capital, which is possibly just the start of long chains of cross-ownership of companies. This procedure greatly underestimates the actual FDI (Kuznetsov, 2016). The MMI methodology captures, for instance, investments through offshore and other ‘transshipment bases’, as well as reinvestment of profits earned abroad. Accounting of ‘transshipment bases’ concerns mostly regional TNCs, especially Russian firms. The EDB database captures projects with accumulated FDI volumes exceeding $1 million. This condition explains why the EDB’s assessments on investments towards Russia, especially from Armenia, Belarus, and Kyrgyzstan, are significantly smaller than the Central Bank of Russia (CBR) data (see Table 6.2), inasmuch as CBR statistics show substantial invest 

Mutual foreign direct investments in the EAEU  83 ments in real properties in Russia by citizens of other post-Soviet countries. In addition, the sectoral structure of FDI has the OKVED (Russian National Classifier of Economic Activities) classification with its codes down to the second digit. Table 6.2

FDI stock in 2021, $ millions FDI from Russia EDB

Armenia

1,140

2,970

637

3

Belarus

4,178

5,318

1,170

447

Kazakhstan

3,982

11,216

3,311

3,035

Kyrgyzstan

252

946

168

2

9,552

20,450

5,286

3,487

Total

CBR

FDI toward Russia EDB

CBR

Sources: Kuznetsov and Vinokurov (2022) for EDB data; Central Bank of Russia (2023).

The information presented in this database contains numerous characteristics in addition to year-end FDI stock and sectoral affiliation of the project. For example, each record of the database specifies the starting year of the investment project and the year when the investor withdrew from the project, if relevant, plus the region and the role of state capital. EDB’s mutual investment database gives the Bank unique expertise on investments in the EAEU, which differs from that of other international organizations researching the region. EDB FDI data are a valuable addition to official direct investment statistics.

6.4

TRENDS IN EAEU MUTUAL INVESTMENTS

6.4.1

Long-Term Dynamics of Mutual FDIs in the EAEU

Since 2008, there have been four distinct periods in CIS FDI stock (see Figure 6.1). Until 2012, mutual FDI stock rose largely because of the investment activity of Russian multinational corporations. In 2010, the post-crisis recovery after the global financial crisis of 2007–2008 started in most of the Eurasian countries, leading to an increase in investor interest in recovery of old projects, and development of new projects. An additional incentive for mutual investment, in particular in manufacturing industries, was the establishment of the Customs Union in 2011. However, in 2012 the countries of the region suffered a deterioration of the macroeconomic situation, and most enterprises became warier of projects that required long-term implementation and considerable investment (EDB, 2013a). Further decline in the FDI stock until 2016 was related to drastic deterioration of Russian–Ukrainian relations since late 2013. It had a strong adverse impact on investment flows between Russia and Ukraine (EDB, 2014). The rise since 2016 is explained by the strengthening of the Russian rouble and recovery of the economy in Russia (Vinokurov, 2018). Investment dynamics driven by the companies from the EAEU member states reversed the trajectory of mutual CIS FDI stock. Mutual FDI by EAEU member states grew twice as fast as CIS countries’ total mutual FDI stock. Thus, the EAEU became the nucleus of investment interaction in the post-Soviet area (Kuznetsov and Vinokurov, 2021). The volume of FDI stock in the EAEU exceeded other FDI linkages in the CIS.

84  The Elgar companion to the Eurasian Economic Union In 2021–2022, the growth of mutual investment stock in the CIS and EAEU slowed down. According to EDB data, the mutual direct investment stock of the EAEU countries amounted to $24.7 billion in 2021 and $24.5 billion as at June 2022 (Kuznetsov and Vinokurov, 2022). However, official statistics published by the EAEU member states demonstrated positive changes in mutual FDI. In 2021, mutual FDI stock in the EAEU was estimated at $18 billion, compared to $16.2 billion in 2020 (EAEC, 2022). In 2022, the trajectory of mutual investments in the EAEU was also positive, as indicated by an increase in the net inflow of mutual direct investments (EAEC, 2023).

Note: *As at June 2022. Source: Kuznetsov and Vinokurov (2022).

Figure 6.1 6.4.2

Mutual FDI stock of the CIS and EAEU countries, $ billions

EAEU Mutual FDI Stock in Global Comparison

EAEU mutual investments amount to a small fraction of the world’s outward FDI stock invested in the EAEU. According to UNCTAD (2022), total EAEU inward FDI stock was $417.5 billion in 2021, which is 17 times greater than their mutual investments. In Armenia, Belarus, and Kyrgyzstan, however, mutual FDI within the EAEU makes a significant contribution to the total volume of FDI stock (more than 35%), due to direct investments, mostly from Russia. The volume of mutual investments of the EAEU countries according to the IMF is about half the EDB estimates – $12.6 billion and $24.7 billion, respectively. As mentioned above, this is due to the inclusion of offshore investments in the EDB database, which makes the EDB estimates more complete. The share in outward FDI stock according to the two institutions’ data totalled 3.0% and 5.9%, respectively.

Mutual foreign direct investments in the EAEU  85 To provide a proper assessment of the extent of FDI cooperation within the EAEU, international comparison is important. The most ambitious regional economic projects worldwide are the European Union (EU) in Europe, MERCOSUR in Latin America, and ASEAN in Southeast Asia. The integration of European countries has deep roots, so the degree of mutual investment is the highest among them. According to our estimates based on IMF data, the share of their mutual investments is 43.9%. So almost half of their capital resources stay inside the economic union. In MERCOSUR and ASEAN, the share of mutual investments is smaller than in the EU but significantly larger than in the EAEU (see Table 6.3). Total outward FDI in MERCOSUR is smaller than in the EAEU, but the volume of mutual investment is almost twice as high. In ASEAN, there is a significant amount of regional capital due to the role of Singapore in investment flows. Table 6.3

Mutual investments in different economic blocs

 

Mutual investments, $ billions

Total outward FDI stock,

Share in total outward FDI

(IMF, EDB data)

$ billions

stock (IMF, EDB data)

12.6 (24.7)

417.5

3.0% (5.9%)

8,296.2

18,886.7

43.9%

46.9

344.3

13.6%

324.3

1,826.9

17.8%

EAEU European Union MERCOSUR ASEAN

Source: IMF (2021), EDB MMI database, authors’ calculations.

6.4.3

Unbalanced Mutual FDI Flows

Mutual FDI flows within country pairs of the EAEU are highly unbalanced. Russia and Kazakhstan are the two key players in the EAEU (see Table 6.4). Their shares in total mutual investments are 82% and 15%, respectively. Belarus comes third, with 2.6% of exported regional FDI. Table 6.4

Mutual FDI stock of the EAEU member states as at June 2022, $ millions

FDI recipients

FDI investors Kazakhstan Kyrgyzstan

Armenia

Belarus

Russia

Total

Armenia

X

1

–

–

3,121

3,122

Belarus

62

X

14

–

5,385

5,461

Kazakhstan

–

35

X

–

10,667

10,702

Kyrgyzstan

–

2

618

X

946

1,566

Russia

3

601

3,035

2

X

3,641

Total

65

639

3,667

2

20,119

24,492

Source: Kuznetsov and Vinokurov (2022).

The EAEU also has pairs of countries with zero investment flows between them. Thus, there are weak investment links between Armenia and the Central Asian countries (Kazakhstan and Kyrgyzstan). Inflow of FDI to Armenia with the EAEU essentially comes only from Russia. Outward Armenian investments in the EAEU mostly focus on Belarus.

86  The Elgar companion to the Eurasian Economic Union The largest regional FDI flows involve Russia’s capital investments. The EAEU has only a few country pairs characterized by both sides exporting capital to each other, namely the bilateral interactions between Russia and Kazakhstan and between Russia and Belarus. The investment pairs of the EAEU without Russia’s participation are modest. There is only one case of significant investment linkages without Russia’s participation, namely, Kazakhstan’s FDI in Kyrgyzstan, and this investment flow is one-sided (i.e., there are hardly any Kyrgyzstani investments in Kazakhstan). Kazakhstan’s outward investments inside the EAEU are mainly focused on Russia and Kyrgyzstan. Belarus mostly invests in Russia. The ‘neighbourhood effect’ is quite visible and continues to play a key role in the EAEU. Firms are more inclined to invest in neighbouring countries than in distant ones. As a result, proximity to more developed economies with a significant number of TNCs can help economies with low investment potential to attract FDI. 6.4.4

Extractive Industries are the Main Investment Targets

Primary sectors and related transportation (e.g., pipelines) dominate in the sectoral structure of mutual FDI in the EAEU. The share of investments in mining of metal ores increased from 13.8% in 2016 to 19.5% as at June 2022 (see Figure 6.2); the share of extraction of oil and natural gas from 9.4% to 10.3%; and the share of the transport sector from 11.8% to 15%. It is important to note that investments in the transport sector are mainly in gas and oil pipeline transport.

Note: *As at June 2022. Source: Kuznetsov and Vinokurov (2022).

Figure 6.2

Sectoral structure of mutual FDI in the EAEU, %

The sectoral structure of mutual investments is more diversified in the EAEU countries than in the broader group of the CIS countries. In the EAEU, extraction of oil and natural gas occupies only the fourth place among industries according to the investment stock, while in the CIS it is in first place (24%). Still, the EAEU states have not been successful in building sophisticated cross-border value chains through technological cooperation. Thus, the share of mutual investments in motor vehicles, machinery, and electrical equipment is very modest,

Mutual foreign direct investments in the EAEU  87 about 1%. Among the non-primary sectors attracting the largest volume of mutual investments are financial services with the share of 12.4%, and retail trade with the share of 7.3% (this mostly includes investments in filling station networks). The financial and retail sectors, which are important for mutual investments in the EAEU, are usually highly progressive in the deployment of information technologies and could contribute to growth in productivity in these sectors of FDI recipient countries. The dynamics of FDIs in the financial sector have varied greatly over time. Acquiring and investing in banks was one of the leading trends in the 2000s, with Kazakhstan an unequivocal leader in the beginning. Then, as Kazakhstan’s banks refocused on the home market in the 2010s, Russian banks started their international expansion. However, the process, which started in 2014, when Russian banks had to reconsider their investments in Ukraine, and accelerated in 2022, when Russian banks had to exit Kazakhstan and Armenia due to Western sanctions, pushed Russian banks entirely out of the picture, except Belarus where they remained key players. 6.4.5

Domination of Russian TNCs

Russian TNCs have traditionally regarded the EAEU countries as a comfortable market. They were among the first in the post-Soviet space to start large-scale foreign expansion (Vinokurov, 2018). Russian companies are the largest exporters of capital in the EAEU. The share of Russia in mutual investment in the EAEU is 82%, mainly because of the scale of the Russian economy, which accounts for more than 87% of the EAEU’s GDP.2 Russia is the only net exporter of mutual FDI in the EAEU. FDI exports exceed FDI imports more than five-fold. The geographical structure of Russian investments is the following: Kazakhstan – 53.0%, Belarus – 26.8%, Armenia – 15.5%, Kyrgyzstan – 4.7%. Despite the small share of Armenia and Kyrgyzstan, Russian investments are the most important for them. The share of GDP coming from FDI from Russian companies in Armenia is 20.0%, Kyrgyzstan – 10.1%, Belarus – 7.8%, Kazakhstan – 5.1%. The largest TNCs dominate in EAEU mutual investments and are primarily from the commodity and infrastructure sectors (oil pipelines). For example, as at June 2022, the largest FDI stock was reported for the following Russian projects in the EAEU: ● LUKOIL, a 13.5% stake in Karachaganak Petroleum Operating B.V. (Kazakhstan), $2.2 billion; ● Gazprom, a 100% stake in the pipeline company Gazprom Transgaz Belarus, $1.25 billion; ● SLAVNEFT, a 42.58% stake in the Mozyr Refinery (Belarus), $0.6 billion; ● JSC Atomenergoprom, a 25.71% stake in LLP KARATAU (Kazakhstan), the main activity of which is mining and processing of uranium ores, $0.6 billion. Among the largest Russian TNCs, Gazprom has the highest combined FDI stock in multiple projects (more than $3.6 billion), and its investments are well diversified, including petrol station networks, oil production (Gazprom Neft), and even the manufacturing of gas stoves in Belarus. Gazprom invests in all the EAEU countries. Another major investor is JSC Atomenergoprom, controlled by Rosatom, which has invested about $1.5 billion in Kazakhstan.



2

On asymmetries of the EAEU economies see Chapter 15 of this Companion.

88  The Elgar companion to the Eurasian Economic Union An important non-ferrous metals investor is Polymetal ($0.75 billion). The company withdrew from Armenia in 2018, retaining active production facilities only in Kazakhstan. 6.4.6

Strengthening Competitiveness

Both private and state-owned corporations are contributing to the growth of mutual investments in the EAEU. Major private companies investing in the region are LUKOIL, KAZ Minerals, Russian Copper Company, Tashir, and EuroChem. The share of projects implemented by investors with 100% private capital in total mutual investments of the EAEU member states was 56% as at June 2022 (going up from 53% in 2016). The remaining FDI activity was produced by companies with government stakes of 50% or more. Major state-owned corporations in the region engaged in FDI are Gazprom, Sberbank, Atomenergoprom (Rosatom), KazMunayGas, and Russian Railways. Regional FDI has helped EAEU companies to increase their competitiveness. TNCs from the EAEU countries acquire assets in the region to strengthen their market positions, expand the natural resources base, and gain better control over the value chain. This strategy is important for companies working in resource industries. For example, by acquiring refineries and sales outlets abroad, Russian enterprises have achieved better control over foreign demand, processing oil in their own refineries and selling the products via their own petrol stations (Vahtra et al., 2005). Western sanctions imposed against Russia in 2022 have created new uncertainty for Russian investors, in a number of instances making their investment outright impossible. The number of projects has been reduced, with the banking sector being heavily affected. In 2022, some Russian banks withdrew from projects in the EAEU and CIS countries, such as Alfa-Bank and Sberbank, which left Kazakhstan, where they had operated since 1994 and 2006 respectively, and VTB, which discontinued its business in Georgia, where it had first established its presence in 2005.3 The reduction of mutual investments in the EAEU was already observed once in 2013–2015 under the influence of similar factors, when the Western sanctions against Russia were first introduced. At the same time, the specific sturdiness of FDI – the fact that change occurs slowly – makes it hardly possible to expect investors to exit their target countries, especially in case of investments in transportation and primary resources sectors that prevail in the region.

6.5 OUTLOOK The year 2022 has proven to be a turning point in many economy-related issues in the post-Soviet space. The radical change of external conditions is likely to have a long-term profound impact on regional economic cooperation in the EAEU. That will certainly include trends in mutual investments. The Russian economy, which exerts a substantial influence on all its neighbours, showed resilience in dealing with the sanctions in 2022. However, in the long term, the Russian economy will have fewer financial resources for growth and will need to substitute for Western



3

See also Chapter 16 of this Companion.

Mutual foreign direct investments in the EAEU  89 technological imports in order to achieve industrial development. It will result in a lower technological level of its economy and, hence, lower international competitiveness. Due to financial restrictions on Russian companies and increased uncertainty about prospects for economic development, overall investment activity in the EAEU will probably be constrained. In addition, Eurasian economic integration as a whole has entered a period of stress. It has witnessed a rise of barriers to mutual trade in 2022. If this becomes a long-term trend, the motivation for mutual investments in the EAEU in industry and agriculture will decrease.4 In 2022, the EAEU countries began to reconsider their position on Russian FDIs – and, generally, reliance on Russia for transit. For example, Kazakhstan plans to develop the Trans-Caspian International Transport Route as another major link for the diversification of transit and export opportunities. In addition, Kyrgyzstan, Uzbekistan, and China signed an agreement on the construction of a railway that will bypass Russia. At the same time, we do not currently see any prerequisites for a further drastic reduction in mutual investments (similar to what happened with financial sector FDIs). Direct investments abroad are sticky, especially in extractive sectors, and Russia continues to wield significant influence in Eurasia. We can also expect a reversal in investment directions in the CIS. While CIS investment ties within the EAEU were formerly a priority, now, considering new investment decisions and strategies, investment ties of individual EAEU countries with other CIS countries may show active growth and outpace mutual investments in the EAEU in the future. At the same time, other trends are likely to gain traction. Importantly, Central Asia has great potential for investment. Investments in transport, the water and energy complex of Central Asia (Vinokurov et al., 2022a, 2022b), strengthening the regional financial sector, and adaptation to climate change will be important in the coming years. We already see a rapid rise of Kazakhstan’s investment in Uzbekistan (finance, cement, real estate). This emerging trend of inner-Central Asian FDIs may gain speed in the 2020s. Investment in transportations may also gain speed in spite of political difficulties. The EAEU countries are looking forward to developing the International North–South Transport Corridor, which provides the shortest freight transport distances between the EAEU member states on the one hand and South Asia, on the other. Total investment in all ongoing or scheduled infrastructure projects amounts to $38.2 billion (Vinokurov et al., 2022c). Considering the available data, external factors, and global trends, we expect the following changes in the qualitative characteristics of mutual investments in the EAEU in the medium term: ● First, faster growth of FDI in greenfield projects (and less investment in brownfield projects). The relocation of Russian production facilities, including to the EAEU member states and CIS countries, may become an additional underlying factor. The main reason is that Russian residency has become less attractive, especially for companies whose main business connects with foreign markets. ● Second, stronger investment activity of Russian companies in a number of post-Soviet countries, including Kazakhstan, Uzbekistan, Azerbaijan, and Belarus, both for support and expansion of existing projects as well as due to the coerced redirection of capital flows to the Eurasian region driven by sanctions.

4

See Conclusion to this Companion.

90  The Elgar companion to the Eurasian Economic Union ● Third, an increased share of projects implemented by investors with 100% private capital and possible slowdown in investment activity by state-owned companies. This will be a consequence of reduced political support for SOEs, which widely used political connections for rent seeking. ● Fourth, due to the development of medium-sized enterprises, there is a potential for mutual investments in industries where cross-border investment activity is currently low: agriculture and food products, tourism, construction and real estate, machinery, and equipment production. ● Fifth, slowdown of EAEU integration and new cross-border barriers since 2022 in the EAEU will restrict mutual investments. In 2022, the EAEU witnessed higher barriers to trade in the region. ● Sixth, growing mutual FDIs of a smaller variety generated by relocated companies and workers. In 2022, there was active migration of the IT sector with its staff from Russia to Armenia, Kazakhstan, Kyrgyzstan, etc. Relocation has already made a significant contribution to the economic development of small economies in the EAEU.

REFERENCES Central Bank of Russia (2023). Nakoplennye pryamye investicii po geograficheskim regionam mira, stranam, instrumentam I vidam ekonomicheskoj deyatel’nosti [Direct investments stock by geographical regions of the world, countries, instruments and types of economic activity]. https://​www​.cbr​.ru/​ statistics/​macro​_itm/​svs/​npi/​. EAEC (2022). Potoki i zapasy pryamyh investicij po stranam mira [Direct investments flows and stocks by countries]. http://​www​.eurasiancommission​.org/​ru/​act/​integr​_i​_makroec/​dep​_stat/​fin​_stat/​ stat​_tables/​Pages/​default​.aspx. EAEC (2023). Vzaimnye pryamye investicii vyrosli v bol’shinstve gosudarstv EAES za 9 mesyacev 2022 goda [Mutual direct investments have grown in most of the EAEU States in 9 months of 2022]. https://​eec​.eaeunion​.org/​news/​vzaimnye​-pryamye​-investitsii​-vyrosli​-v​-bolshinstve​-gosudarstv​-eaes​ -za​-9​-mesyatsev​-2022​-goda​-/​. EDB (2012). Monitoring of Mutual Investments in the CIS. Eurasian Development Bank Centre for Integration Studies Report 6. EDB (2013a). Monitoring of Mutual Investments in the CIS. Eurasian Development Bank Centre for Integration Studies Report 15. EDB (2013b). Monitoring of Direct Investments in Belarus, Kazakhstan, Russia and Ukraine in the Countries of Eurasia. Eurasian Development Bank Centre for Integration Studies Report 19. EDB (2014). Monitoring of Mutual Investments in CIS Countries. Eurasian Development Bank Centre for Integration Studies Report 26. Gertz, G. (2016). Commercial diplomacy and investment protection: American diplomatic interventions to protect US assets overseas since 1990. Doctoral dissertation, University of Oxford. Heifetz, B. A., & Libman, A. M. (2008). Corporate Integration: An Alternative for the Post-Soviet Space. Moscow: LKI. IMF (2021). Coordinated Direct Investment Survey. https://​data​.imf​.org/​regular​.aspx​?key​=​61227426. Kalotay, K., & Sulstarova, A. (2010). Modelling Russian outward FDI. Journal of International Management, 16(2), 131–142. Krasner, S. D. (1978). Defending the National Interest: Raw Materials Investments and US Foreign Policy. Princeton: Princeton University Press. Kuznetsov, A. (2016). Osobennosti analiza geografii zarubezhnyh investicij transnacional’nyh korporacij [Features of the analysis of foreign investments geography of transnational corporations]. Baltijskij region, 3(8), 30–44. Kuznetsov, A., & Vinokurov, E. (Eds.) (2021). EDB Monitoring of Mutual Investments. Report 21/4. Kuznetsov, A., & Vinokurov, E. (Eds.) (2022). EDB Monitoring of Mutual Investments. Report 22/5.

Mutual foreign direct investments in the EAEU  91 Kvashnin, Y. D. (2016). Vzaimnye pryamye investicii na prostranstve SNG: problemy, perspektivy, uroki ukrainskogo krizisa [Mutual direct investments in the CIS: problems, prospects, lessons of the Ukrainian crisis]. Problemy prognozirovaniya, 139–149. Laine, I., & Galkina, T. (2017). The interplay of effectuation and causation in decision-making: Russian SMEs under institutional uncertainty. International Entrepreneurship and Management Journal, 13(3), 905–941. Libman, A., Stone, R. W., & Vinokurov, E. (2022). Russian power and the state-owned enterprise. European Journal of Political Economy, 73, 102–122. OECD (2009). OECD Benchmark Definition of Foreign Direct Investment 2008: Fourth Edition. Paris: OECD Publishing. Saguna, D. D., & Radu, D. I. (2015). Fighting harmful tax competition generated by offshore jurisdictions. Academic Journal of Economic Studies, 1(1), 130–137. Ucal, M., Özcan, K. M., Bilgin, M. H., & Mungo, J. (2010). Relationship between financial crisis and foreign direct investment in developing countries using semiparametric regression approach. Journal of Business Economics and Management, 11(1), 20–33. UNCTAD (2022). World Investment Report 2022: International Tax Reforms and Sustainable Investment. Geneva: United Nations. Vahtra, P., Liuhto, K., & UNCTAD Secretariat (2005). Case Study on Outward Foreign Direct Investment by Russian Enterprises. Geneva: United Nations. Vinokurov, E. (2018). Introduction to the Eurasian Economic Union. Basingstoke and New York: Palgrave Macmillan. Vinokurov, E. (Ed.), Ahunbaev, A., Babajanyan, V., Berdigulova, A., Fedorov, K., Kharitonchik, A., Kuznetsov, A., Malakhov, A., Pereboev, V., Usmanov, N., & Zaboev, A. (2022b). The Economy of Central Asia: A Fresh Perspective. Reports and Working Papers 22/3. Vinokurov, E., Ahunbaev, A., Usmanov, N., & Sarsembekov, T. (2022a). Regulation of the Water and Energy Complex of Central Asia. Reports and Working Papers 22/4. Vinokurov, E. (Ed.), Ahunbaev, A., Usmanov, N., & Zaboev, A. (2022с). International North–South Transport Corridor: Investments and Soft Infrastructure. Reports and Working Papers 22/2. Vinokurov, E., & Libman, A. (2012). Eurasian Integration: Challenges of Transcontinental Regionalism. Basingstoke and New York: Palgrave Macmillan.

7. Labor markets and migration Andrei Korobkov

7.1 INTRODUCTION Following the USSR dissolution in 1991, the labor market configuration in Russia and other post-Soviet states along with their position in the world migration chain have changed drastically. In particular, gone was one of the major postulates of the Communist propaganda – the idea of a guaranteed full employment. Countries have moved to a labor market model, with most experiencing massive unemployment and labor migration. Still, the position of the Russian Federation (RF) turned out to be very different from that of most other post-Soviet states: following a relatively brief period of transition, the country encountered significant labor shortages, turning to its external sources. These changes were taking place along with the evolving migration situation in the RF and its migration policies. On the international plane, Russia quickly turned from one of the most isolated countries into a center of one of the four largest immigration systems of the world. Significant changes took place in the position of other EAEU members: Kazakhstan became initially the major migration donor for the RF in terms of permanent migration. With the depletion of reserves of minority groups willing to relocate permanently (along with the ethnic Russians, those included the representatives of many other groups moving both within the post-Soviet space and to other migrant receiving countries, including, in particular, Germany, Greece, and the Republic of Korea) and the economic stabilization,1 Kazakhstan started to actively compete with the RF for migrants, mostly the temporary and labor ones, especially those from Central Asia, lured in by the cultural closeness of the host population. The situation in Belarus was marked by the multiplicity of migration roles from its very inception as an independent state in 1991. Along with Russia, the country acted as a hub for permanent immigration already since the 1970s and retained this role during the post-Soviet period. At the same time, it became a source of labor migrants for the RF. Nevertheless, Belarus continued to bring in some migrants from both Russia and other post-Soviet states, playing multiple roles in the regional migration chain. Kyrgyzstan has consistently played a role of migration donor – initially due to a permanent outflow of Russian-speakers,2 mostly to the RF, and then, as an important source of labor migrants, for some other EAEU member states. At present, it holds the third place among the former Soviet republics (after Uzbekistan and Tajikistan) and the first, among the EAEU members, on the list of the RF migration donors. With an average income comprising 17%

1 In particular, unemployment levels in Kazakhstan have declined from 12.8% in 2000 to 5.8% in 2010 to 4.9% in 2021. In 2010–21, economic growth amounted to 3.9%. GDP per capita in PPP terms has grown from 73.5% of the RF level in 2000 to 89.7% in 2010 and 92% in 2021 (Eurasian Development Bank, 2022, pp. 17, 19, 22). 2 People of non-titular ethnic groups who lived in the non-Russian ethnic areas and communicated primarily in the Russian language.

92

Labor markets and migration  93 of the RF level (compared to 28% for the neighboring Uzbekistan and 14% for Tajikistan), Kyrgyzstan is practically guaranteed to remain one of the major source countries of labor migrants to the RF as well as Kazakhstan. Nevertheless, its future emigration potential is limited by a relatively small population – 6.7 million in 2021 (compared to 35.3 million in Uzbekistan and 9.9 million in Tajikistan) (Eurasian Development Bank, 2022, pp. 17, 19). In turn, Armenia, historically having significant ethnic diasporas living in Russia and the former Soviet Union already before 1991,3 has seen a substantial migration outflow in the 1990s, first of all to the RF (as well as outside the post-Soviet region). Meanwhile, labor migration from that country has seen a significant change of direction in the current century, with Armenian migrants increasingly moving to countries outside the post-Soviet space. The creation of the EAEU gave the citizens of its member states a significant advantage: in contrast to other labor migrants, they do not need special permissions to work in the host states – members of the union. From this point of view, the EAEU went beyond the already rather liberal migration regime existing in the CIS, making the borders of countries relatively porous; this fits the general pattern of liberalization of movement of capital, labor and trade in the EAEU.4 Nevertheless, at present, only Kyrgyzstan has significant labor migrant diasporas in Russia as well as in Kazakhstan. The events of 2020–23, including the COVID-19 pandemic, the war in Ukraine, and the sanctions regime imposed on Russia and Belarus, have also impacted the labor market and migration situation both in those countries and the EAEU as well as the post-Soviet region in general.

7.2

THE LABOR MARKETS DYNAMICS

The labor markets in the EAEU countries have been developing under the influence of a number of factors, including the evolving economic systems and social policies, the demographic situation dynamics, the state of the national and world economies, and the evolution of migration flows. In the latter case, the creation of the EAEU significantly simplified the movement and employment of the labor force within the union. Meanwhile, initially, during the transitional 1990s, Russia encountered a decline in the levels of income and the population economic activity: in 1991–99, the official real salaries declined three-fold; the economic activity levels fell from 70% in 1992 to 61% in 1998 (for the population 15 to 72 years old). Nevertheless, half of this decline was regained already by the start of the twenty-first century: 66% in 2002 (70% for those in the 15–64 years old category). A similar trend was visible in the field of employment. The original 14-points decline, from 67% in 1992 to 53% in 1998 for the 15–72 age cohort was quickly reversed, reaching by 2002 60% (65% for the 15–64 group) (Gimpelson and Kapeliushnikov, 2006, pp. 25–26, 32). During that period, the Russian economy created up to five million additional jobs – a much better dynamic than those observed in most other transitional economies. A visible role in

In 1989, 1.5 million Armenians (33.3% of the Armenian population of the USSR) lived in other Soviet republics outside Armenia. For Belarusans, this share was 21.2%, for Kazakhs, 19.7%, for Kyrgyz, 11.8%, and for the ethnic Russians, 17.4% (Goskomstat SSSR, Natsional’nyi sostav naseleniia SSSR. Moscow: Finansy i statistika, 1991, 5–19). 4 See also Chapters 4 and 6 of this Companion. 3

94  The Elgar companion to the Eurasian Economic Union this process, at least partially compensating for the shrinking of the budgetary sphere and the closing of numerous state owned enterprises and organizations, was played by the expansion of the informal economy and other forms of employment adaptation, including partial employment, forced administrative vacations, payment delays, as well as the shadow cash and natural payments. Still, the numbers of those employed at the large and medium-size enterprises were quickly declining: from 59 million in 1991 to less than 39 million in 2003. As a result, the share of such enterprises in the overall employment fell from 80% at the end of the Soviet period to 60% by 2005. These changes were paralleled by a significant restructuring of the employment sphere: in the 1990s, the share of those working in the service sector grew by 15 points, reaching 60%. To a large extent, however, this was the result of the declining employment in the production sphere (by more than ten million), while the service sector employment grew by just two to three million. Overall, during 1991–98, more than 40% of the working population switched to a new profession (Gimpelson and Kapeliushnikov, 2006, pp. 27–28, 34). In general, Russia’s transition period was different from most other post-Communist countries: regardless of the deep restructuring and the length of transition, the levels of unemployment turned out to be relatively moderate, reaching 10% five years into the transition and peaking at 14.6% in 1999, quickly declining afterwards – to just 7.9% by the end of 2003. Another noticeable feature of unemployment in Russia was its mostly short-term character: the share of the long-term unemployed was about 35% compared to 60% in other post-Communist economies, while overall, the long-term unemployment was low, at just 2.7% (Gimpelson and Kapeliushnikov, 2006, pp. 28–30). These features of the Russian labor market, along with the demographic factors (low fertility rates and life expectancy), the economic recovery of the 2000s, and the complicated economic and demographic situation in many other post-Soviet states, have quickly turned Russia into a major immigration hub. Nevertheless, regardless of the immigrant inflow, the RF population was still declining in 1993, 1995–2008, and the post-2018 periods, creating additional pressures on the current and future labor markets (Zakharov, 2022, pp. 11–12). Excluding those territories annexed in 2014, Russia’s population in 1990–2020 has declined from 147.7 million to 143.8 million, or by 2.6% (Zakharov, 2022, p. 12). This decline could be much steeper if not for the immigration inflow: due to natural causes, Russian population decreased by 316,000 in 2019 and 689,000, in 2020 (Zakharov, 2022, p. 17). Considering the expected low fertility rate of 1.5–1.8 live births per woman and the unfavorable population age structure, it is clear that immigration, both permanent and temporary, would remain the only mechanism able to moderate the negative demographic tendencies in the RF (Zakharov, 2022, p. 331).

7.3

MIGRATION WITHIN THE EAEU

Russia has encountered significant changes in both the domestic and the international migration trends. Internally, the so-called “Western shift” emerged as the dominant trend – a long-term and persistent migration from the east to the west of the country, whereas its regions started to lose population and labor resources to their western neighbors, while receiving some inflows from those to the east of them. Moscow and the central European region in general became the major beneficiaries of this trend. They were followed by St. Petersburg and the northwestern region as well as the regions in the European Russian south. As a result of these trends, during 1990–2020, population has declined in five out of eight RF

Labor markets and migration  95 federal districts. In Russia’s Asian part, comprising three-quarters of the country’s territory, population has declined by 10% while its overall population share turned out to be below 20% (Zakharov, 2022, p. 23). Another persistent trend of domestic migration represents migration to large urban centers with a relative stabilization of the urban population share overall (74.7% in 2020) (Zakharov, 2022, p. 22). Following the USSR’s dissolution, the RF quickly became the center of the Eurasian migration system that turned out to be one of the four world’s largest – along with those in Western Europe, North America, and the Persian Gulf. Russia serves as a magnet for labor migrants from a large number of countries, first of all those that were previously part of the Russian Empire and later, the USSR. The current situation results from the reversal of the centuries-old migration narratives in Russia and Central Eurasia, that were based on the general isolation from the outside world and the massive movement of ethnic Russians and Russian-speakers (both the commoners and the elites) to the ethnic periphery of empire – with the latter trend being quite typical of imperial state policies worldwide. By the end of the Soviet period, more than 25 million Russians lived outside the RF, while the overall number of those residing outside their titular Soviet republics exceeded 54.3 million. In the RF proper, four million non-Russians also lived outside their titular ethnic administrative units. Following the USSR’s dissolution in 1991, “ethnic succession” emerged as the key element of state- and nation-building policies in many newly-independent states,5 becoming the major factor triggering the first massive migration wave (Vishnevskii, 1997, pp. 6, 13; Vishnevskii, 2000, p. 134; Vishnevskii, 2011, pp. 11–12). Initially, return migration dominated the migration flow and acquired a genuinely landslide scale. This was not totally unexpected: many among the 19% of USSR citizens who lived outside their titular states by the time of the country’s dissolution attempted to move to what were often perceived as their ethnic homelands – their titular republics – a direct result of the Soviet ethno-federal policies.6 During 1992–2009, Russia’s net migration inflow was 6.3 million – compared to 1.5 million in 1981–90. The result was the increasing population homogenization and growing shares of titular majorities in the majority of post-Soviet states. Already during 1989–2000, the number of Russians in the post-Soviet states outside Russia declined by 4,675,000 or by 18.5%. By 2005, this number further declined to 18 million, including 8.2 million in Ukraine; 4.1 million, in Kazakhstan; 1.2 million in Belarus; and 1 million in Uzbekistan (Mukomel and Pain, 2006, p. 21). The exodus of ethnic Russians and non-titular nationalities from the ethnic republics resulted in the quick shrinking of these groups’ shares in the population of the newly-formed

5 In reality, the reversal of migration trends in the region started already before perestroika and the consequent dissolution of the USSR. From 1959 to 1974, Russia’s population loss to other Soviet republics amounted to 2.1 million, yet already after 1975, the migration balance of the RF became positive; between 1976 and 1990, the net immigration amounted to 2,578,000, and has remained positive ever since. From 1979 to 1988, Armenia alone lost about 33% of its ethnic Russian population. This trend, tightly related to the republican policies of “ethnic succession”, laid the foundation for the increase of the titular nationalities shares in the general population and especially among the political and professional elites of many union republics and the RF ethnic regions. 6 Goskomstat SSSR, Natsional’nyi sostav naseleniia SSSR. Moscow: Finansy i statistika, 1991, 5–19.

96  The Elgar companion to the Eurasian Economic Union states. In Kazakhstan, for example, the ethnic Russians’ share fell from 37.8% in 1989 to 30% in 1999, to 25% in 2008.7 Thus the initial narrative of the 1990s was related to a permanent, primarily politically and ethnically motivated, return migration of ethnic Russians to the RF. For a relatively short period of time, it was paralleled by the movement of the representatives of all other major ethnic groups to their former titular republics. Meanwhile, this trend was relatively short-term: upon reaching its peak in 1994 (with more than a million Russian-speaking permanent migrants arriving that year), the inflow started to decline quickly to 300–400 thousand annually by the end of the 1990s. The new migration narrative was related to a massive, mostly temporary, labor migration to Russia of the citizens of newly independent states, with a relatively small, but slowly growing, share of migrants coming from the countries outside the post-Soviet space. By 2010, more than 12 million of the RF’s residents (about 8.5% of its population) were born outside the country (Chudinovskikh, 2004, pp. 10–27, 36).8 Simultaneously, Russia ranked third in the world after India and Mexico in terms of the number of emigrants: 10.5 million by 2015 (UN, 2015). While most of these migrants moved within the post-Soviet space, in 1991–2005 alone, more than 1.3 million Russian citizens also obtained permits for a permanent emigration to the West (Vishnevskii, 2006, p. 325). Thus the migration situation in both Russia and some of the other post-Soviet states was also marked by a parallel existence of another narrative, involving a relatively smaller emigration flow, which included a significant elite component. Essentially, this means that Russia played simultaneously all three possible roles in the international migration chain, receiving from and sending migrants abroad, and serving as a country of migrant transit. To a degree, this multiplicity of roles also became visible in the cases of Kazakhstan and Belarus, which actively competed with the RF for labor migrants during particular periods. While lagging behind the absolute immigration indicators, Belarus, for instance, had similar to the RF indicators of immigration intensity per 1,000 residents. It has been further enhanced by the ongoing war in Ukraine, the strict sanctions regime, and the escalating tensions between Russia and the Global North countries. Specifically, in the wake of the war, Kazakhstan, Belarus, and even Armenia and Kyrgyzstan started to receive Russian migrants – both intent on staying there or trying to move further. In particular, within the first two weeks after the mobilization announcement in the RF in September 2022, more than 200,000 people moved from Russia to Kazakhstan, with 147,000 of them leaving the country within a month.9 A similar dynamic was visible in Kyrgyzstan: the Labor Ministry claimed 760,000 people entered the country from the RF in September–October 2022 alone, with 730,000 moving out during the same period.10 In the case of Armenia, Russians comprised 46% of those who visited that country in the first nine months of 2022: 567,429 out 7 Goskomstat SSSR, Natsional’nyi sostav naseleniia SSSR. Moscow: Finansy i statistika, 1991, 5–19. 8 It should be noted here that at least 4.4 million among them were born in other Soviet republics and moved to the RF before the USSR dissolution. 9 Mikhail Rodionov, ‘V Kazakhstan c 21 sentiabria v’’ekhali bolee 200 tysiach rossiian. Deportirovali semerykh’. Gazeta.ru, October 4, 2022. https://​gazeta​-ru​.turbopages​.org/​gazeta​ .ru/​s/​politics/​2022/​10/​04/​15571807​.shtml​?fbclid​=​I​wAR2mBi0VY​XBk9QBmSNd​FX027JoUX4​ hEHEgdgHOR​jth5AQwxGAzndYhazxpY. 10 Varvara Mitina. ‘V Kirgiziiu pribyli 760 tysiach rossiian. No mnogie uzhe poekhali dal’she’. Sekret Firmy, October 12, 2022. https://​secretmag​-ru​.turbopages​.org/​secretmag​.ru/​s/​news/​v​-kirgiziyu​

Labor markets and migration  97 of 1,240,000.11 One of the recent estimates (its methodology has not been clarified) put the number of “new” Russian migrants in Kazakhstan at 100,000; in Armenia, at 65,141; and in Kyrgyzstan, at 30,000.12

7.4

THE REGIONAL MIGRATION DYNAMICS

Migrant workers have become an essential and irreplaceable component of the Russian labor market. Their numbers vary, depending on the season, from 3.6 to 4.5 million (plus up to 0.5 million of those who are employed in the “shadow” form). Thus migrant workers comprise about 7% of the Russian active population (Zakharov, 2022, pp. 289, 291). The pattern of the international labor migration is similar to the domestic one: 45% of the international labor migrants work in Moscow and the surrounding Central Federal District; 16% in St. Petersburg and the Northwestern District. None of the other districts employs more than 9% of labor migrants (Zakharov, 2022, p. 296). The territorial origins of the labor migration flows are even more concentrated: 92–93% come from the former Soviet republics; about two-thirds originate in Tajikistan, Uzbekistan, and Kyrgyzstan. Thus Kyrgyzstan at present is the only EAEU member sending large numbers of labor migrants to the RF. The shares of Ukraine and Moldova were consistently declining even before the events of 2022. In 2019 they comprised respectively 8% and 3.2% of the flow. Outside the post-Soviet space, the largest migration donors were China, at 2.6%, followed by Turkey, Germany, Viet Nam, Serbia, and India, with each accounting for less than 1% of the migrant flow (Zakharov, 2022, pp. 339). While the majority come initially as temporary labor migrants, their status frequently changes to a permanent one. This generally corresponds to the RF’s interests, as the country needs both the migrant workers and the demographic resources. The Russian labor market is marked by an expressed ethnic division of labor. In addition, despite the shortage of workers in the Russian economy, labor migrants frequently lack the skills required for qualified and better paid jobs. Thus most well-paid and more prestigious jobs requiring qualified training and competencies are usually taken by the local workers while labor migrants are relegated to the low-skilled 3Ds (dirty, dangerous, demeaning) jobs. As a rule, they cannot afford an additional, even short-term, certified training, at best, improving their skills at the job site. Given the significant income gap in the Russian society, migrants from Central Asia, including the EAEU’s Kyrgyzstan, join the Russian “working poor” class. In 2019, of the 467,000 labor migrants employed by businesses, 33% worked in retail; 22% in construction; 18% in manufacturing; 7% in agriculture and forestry; 7% in hospitality and restaurant business; 6% in other services; and 4% in transportation and storage facilities. In the case of 2,878,000 migrants working

-pribyli​-760​-tys​-rossiyan​-no​-mnogie​-uzhe​-poekhali​-dalshe​-12​-10​-2022​.htm​?fbclid​=​I​wAR0LHqbg0​ TsrdRMGwAP​cMbV85chgT​9nzJ4FRnuVTHC5BmAiCfeTRjW4qv50. 11 ‘V sentiabre v Armeniiu pribylo 97 tysiach rossiian – glava komiteta’. Sputnik Armeniia, October 14, 2022. https://​ru​-armeniasputnik​-am​.turbopages​.org/​ru​.armeniasputnik​.am/​s/​20221014/​v​-sentyabre​-v​ -armeniyu​-pribylo​-97​-tysyach​-rossiyan​-​-​-glava​-komiteta​-49785212​.html​?fbclid​=​IwAR3eaPxOACytk​ -JQLMiRYuM​_nCn5l​hNWD2KzUAN4T0v9VvSkumZMlaw8iyY. 12 Francesca Ebel and Mary Ilyushina, ‘Russians abandon wartime Russia in historic exodus’. The Washington Post, February 13, 2023. https://​www​.washingtonpost​.com/​world/​2023/​02/​13/​russia​ -diaspora​-war​-ukraine/​.

98  The Elgar companion to the Eurasian Economic Union for private persons, 60% were employed in construction; 12% in agriculture; 10% worked as maids and house help; 8.5% in transportation; and 4% in daycare (Zakharov, 2022, p. 298k). The COVID pandemic and the war in Ukraine have disrupted both the economic environment and the situation on the labor market, forcing many migrants to return home and creating simultaneously a new emigration flow, directed both within and outside the EAEU. With the start of the pandemic, the overall number of migrants in the RF declined significantly: the number of those registered at the place of residence fell from 19 million in 2019 to 9.3 million in 2020. This figure included 4.2 million of those newly arriving (down from 13.9 million in 2019), of whom 2.4 million came to the RF in search of employment (down from 5.5 million in 2019). Another 870,000 came on private visits (2.5 million in 2019), 265,000 came to study (682,000 in 2019), 384,000 claimed that they were tourists (4.2 million in 2019), and 303,000 came for other purposes (992,000 in 2019). The already high share of migrants from Central Asia has further increased. In 2016, they accounted for 63% of all migrant workers totaling 2.7 million, but in 2019, their share increased to 71% and 3.9 million people, respectively, and inched up even higher in 2020 to 75%, or 1.8 million. In 2020, Russia welcomed 1,011,000 migrant workers from Uzbekistan, or 43% of the total of incoming foreign laborers; 507,300, or 22% arrived from Tajikistan; and another 190,300, or 8% from Kyrgyzstan. Thus the EAEU members’ share in the overall labor migration inflow, regardless of the favorable immigration and employment regime for the union member states’ citizens, has been relatively low (Mkrtchian and Florinskaia, 2021). As of May 1, 2021, the number of migrant workers who stated “employment” as the purpose of their visit to Russia while crossing the border stood at 2.7 million, with the Central Asian countries accounting for three-quarters of this figure. Compared to May 2020, the number of migrant workers fell by more than a third (down 35%), and, if compared to May 2019, the decline reached 38%, i.e. roughly two out of every five migrants left the country (Mkrtchian and Florinskaia, 2021). This drop was attributable to the fact that the migrant workers’ primary employment spheres, especially in the service area, suffered the most from the pandemic. To overcome the crisis, employers were laying off their staff or reducing working hours, starting with migrants, especially those who had limited work experience or who could be easily replaced whenever needed. Unemployment was the main factor driving migrant workers out of Russia: while in 2020, between 10% (Gimpelson and Kapeliushnikov, 2020) and 25%13 of the Russian workers lost their jobs with the introduction of lockdowns, for migrant workers, these figures were in the range of 40% to 45% (Denisenko and Mukomel, 2020). The decline in consumer purchasing power had a major impact on the informal economy, also reducing the number of available jobs. On March 18, 2020, the Russian government restricted the entry for foreign nationals and stateless persons,14 bringing many enterprises dependent on migrant labor to a halt or at least substantially undermining their operations. The sectors strongly affected by this decision included the construction and hospitality industries, including restaurants and hotels, cleaning services, and trade. As a result, the finances of many migrants took a hit in 2020–22, forcing many to return home in order to wait out the uncertainty. According to a survey of 900 migrant workers from Tajikistan, Kyrgyzstan Karina Pipiia, ‘Ot izolyatsii k migratsii’ [From isolation to migration]. Vedomosti, June 3, 2020. https://​www​.vedomosti​.ru/​opinion/​articles/​2020/​06/​03/​831861​-izolyatsii​-migratsii. 14 Government Directive No. 635-R on March 16, 2020. http://​government​.ru/​docs/​39179/​. 13

Labor markets and migration  99 and Uzbekistan,15 conducted by the International Organization for Migration (IOM) office in Russia between the fall of 2020 and the winter of 2021, 69% of migrant households claimed that their situation had worsened. This was attributable to a number of factors including lower pay or insufficient income (44%) and psychological stress (36%). During the pandemic, 28% of respondents lost their jobs, and 11% accumulated debt. In addition, 9% said that they had to skimp on food, and 2% suffered from poorer access to healthcare services. Only 28% of respondents coming from Central Asia claimed that nothing had changed for them. The factor of psychological stress came up more frequently in interviews with women (44%) than with men (28%) (Poletaev and Korobkov, 2021). The Russian government has taken a number of measures16 to help migrants living in the country.17 However, this did little to mitigate the severe blow suffered by the migrant-intensive sectors of the Russian labor market. Just like all other destination countries for migrant workers, it would have taken the Russian economy a long time to recover, while the structural changes resulting from the shifts to and from remote working require migrant workers (both within and outside Russia) to master new, digital, skills they frequently lack or cannot use due to the character of their jobs. The invasion of Ukraine on February 24, 2022 resulted in a further disruption of the RF economic ties with the outside world and the wide ruble fluctuations. Clearly, even with some stimuli for the development of local production, substituting for lost imports, these developments generally mean that instead of recovery, the Russian economy has entered another crisis stage that negatively affects both the labor market in general and the labor migration flows in particular. The breakup of ties due to the pandemic and the war in Ukraine along with the spontaneous emigration of Russian citizens in 2022 and the return of some of the labor migrants to their homelands imposed serious labor shortages on many sectors of the economy. The construction industry felt this outflow so sharply that the authorities began to discuss special measures and programs to compensate for the new deficit.18 In the main countries of origin for Russia-bound migrants, primarily the states of Central Asia, the socio-economic situation has deteriorated significantly. According to the World 15 ‘Otchet po rezultatam issledovaniya sotsialno-politicheskikh posledstvii pandemii COVID-19 na migrantov, prebyvaiuschich na territorii Rossiiskoi Federatsii’ [Report based on the survey of socioeconomic consequences of the COVID-19 pandemic for migrants residing in the Russian Federation]. http://​ moscow​.iom​.int/​sites/​default/​fi les/survey_rf_covid_2021_small.pdf. 16 Presidential Executive Order No. 274 on April 18, 2020 on temporary measures to regularize foreign nationals and stateless people in the Russian Federation in connection with the threat of the novel coronavirus (COVID-19) spreading further. http://​publication​.pravo​.gov​.ru/​Document/​View/​ 0001202004180001; Letter of the Russian Interior Ministry No. 1/2964 dated March 19, 2020 on additional measures to prevent the spread of the coronavirus infection 2019-nCoV. https://​www​.garant​.ru/​ products/​ipo/​prime/​doc/​73754036/​. 17 Aleksandra Dokuchayeva, ‘Novye migratsionnye pravila na period pandemii’ [New pandemic-era migration rules]. Forum pereselencheskikh organizacii [Migrant Organizations Forum]. April 8, 2020. https://​migrant​.ru/​novye​-migracionnye​-pravila​-na​-period​-pandemii​-dlya​-ig​-i​-lbg/​. 18 List of assignments following a joint meeting of the State Council and the Council for Strategic Development and National Projects. January 16, 2021. http://​www​.kremlin​.ru/​acts/​assignments/​orders/​ 64900; Veronika Kulakovа and Ekaterina Yаsakova, ‘Kadrovaia epidemiia: iz-za nekhvatki migrantov sryvaiutsia sroki vvoda zhil’ia’ [Human resources epidemic: due to a shortage of migrants, the deadlines for commissioning housing are disrupted]. Izvestiia, December 23, 2020. https://​iz​.ru/​1103166/​veronika​ -kulakova​-ekaterina​-iasakova/​kadrovaia​-epidemiia​-iz​-za​-nekhvatki​-migrantov​-sryvaiutsia​-sroki​-vvoda​ -zhilia.

100  The Elgar companion to the Eurasian Economic Union Bank, in the EAEU member Kyrgyzstan, poverty has increased from 20% to 31% in 2020, and 35% in 2021.19 Some 700,000 people lived below the poverty line in 2020 – a significant number for a country with a total population of just 6.7 million. Figures reported by Kyrgyzstan’s National Statistics Committee were slightly lower, with poverty at 25.3% in 2020, up 5.2% from 2019. The Kyrgyz living in poverty number 1.68 million, with 74% of them residing in rural areas. As many as 833,900 young people under 17 years of age (31.8%) lived in poverty in 2020.20 Ensuring stable jobs for working-age people is viewed as the main tool for fighting poverty. However, the effectiveness of these efforts has been undermined by rising unemployment, high inflation and the temporary pandemic-related restrictions on travel to Kazakhstan and Russia. Outside the EAEU, Tajikistan sent 129,000 workers to Russia in 2020, which is just a third of the 2019 figure.21 According to Uzbekistan’s First Deputy Minister of Employment and Labor Relations Erkin Mukhitdinov, about half a million migrant workers returned to the country by the beginning of summer 2020.22 The situation has worsened in those countries where migrant families depend heavily on remittances. The decrease in the scale of international migration has led to a drop in the remittances of migrants to their home countries (Bondarenko, 2020). In 2020, the amount of private transborder remittances from Russia to the CIS countries (the main source region of migrants to Russia) overall was only 85.6% of what it had been in 2019; for Kazakhstan it stood at 89%, and Kyrgyzstan, at 88% of the 2019 level.23 According to a survey carried out by the IOM’s Office in Russia in late 2020 among 900 migrant workers from Uzbekistan, Kyrgyzstan and Tajikistan, all of whom were employed at the time of the interviews,24 only 12% did not send any money back home in 2020. At the same time, there was a significant reduction in the amounts the migrants sent to their countries of origin. At the height of the first wave of the pandemic, between April and June 2020, 38% of respondents said that their remittances were smaller than usual, while 39% did not send any money back home at all. The remittances remained unchanged for less than a quarter of migrant workers, with 23% saying that they had sent home the same amounts as usual. Remittances frequently provide a lifeline for the survival of households in the migrants’ countries of origin.

19 ‘Naselenie Kirgizii stremitelno nishchayet – za chertoi bednosti kazhdyi tretii’ [Kyrgyzstan’s population is rapidly sliding into poverty]. REGNUM, March 16, 2021. https://​regnum​.ru/​news/​economy/​ 3216393​.html. 20 ‘Kazhdyi chetvertyi kyrgyzstanets zhivet v bednosti’ [One in four people in Kyrgyzstan lives in poverty]. Sputnik Kyrgyzstan, June 13, 2021. https://​ru​.sputnik​.kg/​society/​20210613/​1052850527/​ kyrgyzstannacstatkom​-bednost​-regiony​-deti​.html. 21 ‘Chislo vyekhavshikh iz Tadzhikistana na zarabotki snizilos’ na 57% za polugodie’ [The number of people who left Tajikistan for earnings decreased by 57% in half a year]. Interfax, July 23, 2020. https://​www​.interfax​.ru/​world/​718693. 22 Erkin Mukhitdinov, ‘Rynok truda Uzbekistana ispytyvaet ogromnoe davlenie iz-za rosta bezrabotnykh’ [Uzbekistan’s labor market under pressure from rising unemployment]. May 31, 2020. https://​www​.podrobno​.uz/​cat/​obchestvo/​uzbekistana​-ispytyvaet​-ogromnoe​-davlenie​-iz​-za​-rosta​-chisla​ -bezrabotnykh​-erkin​-mukhitdinov​-/​. 23 Central Bank of Russia data. https://​cbr​.ru/​hd​_base/​tg/​. 24 ‘Otchet po rezul’tatam issledovaniia sotsialno-politicheskikh posledstvii pandemii COVID-19 dlia migrantov, prebyvayuschikh na territorii Rossiiskoi Federatsii’ [Report based on the survey of socioeconomic consequences of the COVID-19 pandemic for migrants residing in the Russian Federation]. http://​ moscow​.iom​.int/​sites/​default/​fi les/survey_rf_covid_2021_small.pdf.

Labor markets and migration  101 According to the 2020 IOM survey, about a half of the respondents (48%) were the main breadwinners in their families, while more than a third of them (35%) shared the burden in providing for their families with someone else. The financial support from migrants working in Russia is critical for about two-thirds of their families (65%) in the Central Asian countries. Usually, the main breadwinners are men rather than women.25 This is the result of the continuous numerical domination of men: they comprise 56–57% of the overall immigration inflow (and close to 70% for immigration from outside the post-Soviet space). Kyrgyzstan demonstrates the highest levels of female migrant employment for Central Asia: 35% compared to 12% for workers from Tajikistan and 13% from Uzbekistan (Zakharov, 2022, pp. 286, 291). In about two-thirds of cases (65%), men’s earnings account for most of the household income. Still, for Kyrgyzstan, this share is 46%. In less than one-third of cases (28%), men share the financial burden with another family member, with women playing an increasingly important role. This is especially typical for single-parent households. It is also not uncommon for single or divorced women to provide for their elderly parents, as well as children. In Kyrgyzstan, women were the main earners in their families in 33% of cases.26 Even with an employment contract in place, employers frequently do not submit a notice of employment for a foreign national. Meanwhile, the failure of a foreign national to submit a copy of an employment contract or a civil law contract for the performance of work (rendering of services) with the organization where they work to the Interior Ministry within two months from the moment of signing puts such a person in violation of the law – even if it is the employer’s fault – leading to a license revocation.27 According to ILO data, 48% of Kyrgyz along with 62% of Tajiks and 61% of Uzbeks were working without a formal employment contract in Russia at the height of the pandemic (late 2020–early 2021).28 Such a significant share of undocumented employment is the reality of the Russian labor market, dictated to a large extent by employers imposing the terms of employment on migrants willing to accept the dictate in order to feed their families back home. The vulnerable foreign workers learn the most effective employment and behavioral practices, trying to adapt to the prevailing conditions and following the rules of the game, frequently choosing to resolve problems quickly rather than spending time going through the legal channels.

25 ‘Otchet po rezul’tatam issledovaniia sotsialno-politicheskikh posledstvii pandemii COVID-19 dlia migrantov, prebyvayuschikh na territorii Rossiiskoi Federatsii’ [Report based on the survey of socioeconomic consequences of the COVID-19 pandemic for migrants residing in the Russian Federation]. http://​ moscow​.iom​.int/​sites/​default/​fi les/survey_rf_covid_2021_small.pdf. 26 ‘Otchet po rezul’tatam issledovaniia sotsialno-politicheskikh posledstvii pandemii COVID-19 dlia migrantov, prebyvayuschikh na territorii Rossiiskoi Federatsii’ [Report based on the survey of socioeconomic consequences of the COVID-19 pandemic for migrants residing in the Russian Federation]. http://​ moscow​.iom​.int/​sites/​default/​fi les/survey_rf_covid_2021_small.pdf. 27 Federal’nyi zakon ot 25.07.2002 No. 115-FЗ (red. ot 02.07.2021) ‘O pravovom polozhenii inostrannykh grazhdan v Rossiiskoi Federatsii’ (s izm. i dop., vstupil v silu s 29.12.2021). https://​ www​.consultant​.ru/​document/​cons​_doc​_LAW​_37868/​7​8903dca1f0​ac1f3abc08​d2f8cd1c0e​2fddc826b/​ ?ysclid​=​l4cm3g2cfn420895976. 28 Global Estimates of Modern Slavery: Forced Labour and Forced Marriage. International Labour Organization (ILO), Walk Free, and International Organization for Migration (IOM). Geneva, 2022. https://​www​.ilo​.org/​wcmsp5/​groups/​public/​-​-​-ed​_norm/​-​-​-ipec/​documents/​publication/​wcms​_854733​ .pdf.

102  The Elgar companion to the Eurasian Economic Union

7.5

EMIGRATION OUTSIDE THE EAEU

While being a magnet for migrants within the EAEU and the post-Soviet space in general, Russia also ranks third in the world after India and Mexico in terms of the number of emigrants: 10.5 million by 2015 (UN, 2015). This flow was generated by both the pull and the push factors of migration. In the former case, the 1990s saw an important role in the liberalization of migration regime and the emergence of opportunities to work and study abroad, the higher living standards and the prospects for professional growth, and the generally welcoming (at that time) atmosphere for Russian scholars, students, qualified professionals, and, later, “investment migrants”. In their turn, the push factors, especially in the 1990s, included the economic and political instability in Russia and the general decline of the budget sphere, especially the quick degradation of the Russian state-run industry and the academic domain. The share of research expenditures in Russian GDP was 0.24% in 1992 and 0.36% in 2000 (representing, respectively, 1.69% and 2.19% of the federal budget). During this initial period (1992–2000), the number of those employed by academic institutions fell from 1,532,000 to 888,000, or by 42%, while the number of researchers fell from 804,000 to 426,000 (or by 47%).29 These processes resulted in the formation of significant Russian and Russian-speaking elite diasporas in the major receiving countries, primarily in North America and Western Europe. Already by 2010–11, more than 660,000 university educated Russians were living abroad, putting the RF into the category of states with large (300,000 to 1,000,000 migrants with a university degree) external elite diasporas – along with such countries as Mexico, South Korea, Viet Nam, Iran, Taiwan, Morocco, and Columbia.30 Of particular importance was the massive emigration of Russian scholars and educators: in 2012 this highly-qualified elite diaspora could be estimated at about 300,000–350,000, including approximately 56,000 students studying abroad (2015). The academic flow was heavily dominated by the Basic and Technical Sciences experts; for those in Social Sciences and Humanities, the share in 2002–2003 was just 6.1% (Korobkov and Zaionchkovskaia, 2012, p. 332). The flow was also skewed geographically towards the two Global North regions: North America and Western Europe. They accounted respectively for 30.4% and 42.4% of the intellectual migration flow, with the United States at 28.7% and Germany at 19%, holding respectively the first and second places in practically all academic fields (Korobkov and Zaionchkovskaia, 2012, pp. 335–336). With the economic and political stabilization of the 2000s, the research-related budgetary expenditures increased, reaching their peak in 2015: 2.81% of the federal budget (0.53% of the GDP). This change resulted in the slowing down of the academic personnel decline and the shrinking elite outflow: between 2000 and 2018, the number of those employed in the academic sphere declined from 888,000 to 683,000, or by 23.1%, while the number of researchers fell from 426,000 to 348,000, or by 18.3%.31 For the pandemic-era 2021, the

Federal’naia sluzhba gosudarstvennoi statistiki (2021). Rossiia v Tsifrakh – 2020. Moscow. https://​gks​.ru/​bgd/​regl/​b20​_11/​Main​.htm. 30 This group is second to that of countries with extra large diasporas (more than 1,000,000). That group included India, 2,080,000; China, 1,655,000; the Philippines; the UK; and Germany (Dezhina et al., 2015, p. 18). 31 Federal’naia sluzhba gosudarstvennoi statistiki (2021). Rossiia v Tsifrakh – 2020. Moscow. https://​gks​.ru/​bgd/​regl/​b20​_11/​Main​.htm. 29

Labor markets and migration  103 respective figures turned out to be 663,000 and 340,000.32 This decline was much slower than in the 1990s (see Table 7.1). While the number of Russian students studying abroad remained relatively stable at 50,000 to 60,000, the RF has also regained its position as one of the leading international education hubs.33 Still, the EAEU shares in these educational flows remain relatively low. Among 56,312 Russian students studying abroad in 2016, 1,953 were in Belarus; 1,377 in Kyrgyzstan; 1,140 in Armenia, and 1,097 in Kazakhstan. Thus the overall number of the Russian students in the EAEU countries was 5,567 or 9.9%. A very different picture emerges for the educational migration in the opposite direction. For Kazakhstan, out of 48,875 students studying abroad, 35,106 went to the RF; 4,357 to Kyrgyzstan; 151 to Belarus; and 20 to Armenia. Thus the EAEU share was 81%, with 71.8% going to Russia and 8.9% to Kyrgyzstan. In the case of Kyrgyzstan, among its 5,885 students studying abroad, 3,215 went to Russia; 434 to Kazakhstan; and 10 to Belarus. Thus the EAEU share in this educational migration flow was 62.2%, with Russia receiving 53.1% of the flow, and Kazakhstan 7.4%.34 In other words, the flow of educational migration within the union was highly asymmetrical, directed mostly towards Russia. It also had some subregional overtones, indicating strong ties between the neighboring Kazakhstan and Kyrgyzstan, along with the weakness of those countries’ links with Armenia and Belarus. The deepening of integration within the EAEU, including the mutual recognition of educational diplomas, should lead to the expansion of educational migration. Still, Russia’s dominant role as an educational migration hub could be expected to be retained (the war in Ukraine introduces multiple uncertainties in this respect though, as discussed in what follows). Table 7.1

Russian R&D dynamics, 1992–2018 1992

2000

2010

2015

2018

2021

1,532.6

887.7

736.5

738.9

682.6

662.7

Researchers, 1000

804.0

425.9

368.9

379.4

347.9

340.1

Research

1.69

2.19

2.35

2.81

2.52

2.53

0.24

0.36

0.51

0.53

0.40

0.48

Personnel, 1000

expenditures, % of federal budget Research expenditures, % of GDP

Source: Federal’naia sluzhba gosudarstvennoi statistiki (2021). Rossiia v Tsifrakh – 2020. Moscow. https://​gks​.ru/​ bgd/​regl/​b20​_11/​Main​.htm; Federal’naia sluzhba gosudarstvennoi statistiki (2022). Russian Statistical Yearbook 2022, 497–500. https://​rosstat​.gov​.ru/​storage/​mediabank/​Ejegodnik​_2022​.pdf.

Meanwhile, Russia’s overall role in the elite migration chain continues to evolve. Essentially, the RF has moved from a position of a country in a deep economic and social crisis, serving as a source of a massive elite outflow in the 1990s to that of a medium-developed state, both sending and receiving migrants as well as acting as a migrant transit country. Losing its elite migrants to the highest developed countries of the Global North, Russia started to at least

32 Federal’naia sluzhba gosudarstvennoi statistiki (2022). Russian Statistical Yearbook 2022, 497–500. https://​rosstat​.gov​.ru/​storage/​mediabank/​Ejegodnik​_2022​.pdf. 33 Unipage (2019). ‘Mezhdunarodnye studenty’. https://​www​.unipage​.net/​ru/​student​_statistics. 34 Unipage (2019). ‘Mezhdunarodnye studenty’. https://​www​.unipage​.net/​ru/​student​_statistics.

104  The Elgar companion to the Eurasian Economic Union partially substitute for these losses by luring in such migrants from the less developed states, primarily those in the post-Soviet space. In the period between 2010 and 2019, the RF issued 230,000 work permits for highly qualified specialists. Nevertheless, bringing such migrants to the RF is complicated by the complexity of the process and the exclusion in 2015 of the post-Soviet states’ citizens from the program (Zakharov, 2022, p. 339). Still, compared to the 1990s, the relative impact of migration pull factors was enhanced while that of the push factors has decreased. This multiplicity of roles was for the most part retained by the RF even after the expansion of the sanctions regime following the first Ukraine crisis and the annexation of the Crimea in 2014 and the general decline of migration activity worldwide resulting from the COVID-19 restrictions. Meanwhile, the second Ukraine invasion, which started on February 24, 2022, has drastically changed both the internal situation in the RF and its relationship with the international community, returning it to a crisis level, with the push factors of migration (such as the deteriorating political situation, the sharp disagreements with the governmental policies among the particular segments of society, the unwillingness of many to serve in the RF military, the fear of losing a job and a source of income, etc.) coming to the forefront. The result was the formation of new migration flows, characterized by the high shares of young people, men, and the representatives of various elite groups. The shrinking economic output and the withdrawal of the majority of transnational companies as well as many Russian firms and individual entrepreneurs from the RF threatened the jobs and livelihoods of large segments of the Russian population. The introduction of numerous sanctions cut the long-term international ties established in the economic, political, academic, artistic, and athletic spheres and affected the lives of millions of people, first of all, the representatives of various professional, business, academic, cultural, and athletic elites, including those opposing the war as a matter of principle. The 2022 flow has de facto consisted of two, separate and subsequent subflows. The first one started immediately after the invasion of Ukraine in February 2022 and reached its peak in March 2022. The second one, significantly larger in scale, developed in the aftermath of the declaration of a 300,000 strong “partial” mobilization by the Russian President Vladimir Putin on September 21, 2022 and the subsequent announcement by the RF Defense Minister Sergei Shoigu that up to 25 million Russian citizens could be potentially eligible for mobilization orders – a move de facto involving in the war the majority of the RF population (if one adds up the potential reservists and their family members). In contrast to the 1991–2021 period, the current situation is marked by a number of new features: ● The new migration waves are defined primarily by the push factors, frequently forcing people to leave even in the absence of adequate preparation (the previous experience of work or study abroad, the personal or professional networks, language proficiency) or clear prospects in the destination countries. ● Migration is more frequently directed towards the relatively smaller and weaker economically countries than in the 1990s, including those within the EAEU and other post-Soviet states, Eastern Europe, Turkey, Mongolia, Latin America as well as the states in the Persian Gulf and Southeast Asia. This, in particular, leads potentially to the reversal of those long-term trends that dominated the migration patterns in Central Eurasia for the last three decades, especially in regard to elite migration. Having an important symbolic value,

Labor markets and migration  105 this reversal may create significant long-term labor market and demographic problems for the RF. ● In contrast to the previous migration waves, the current ones are marked by their hectic, spontaneous character and the heavy presence in the flow of the young people working in the IT and the business sectors, who are relatively flexible and can seek jobs or create businesses in the private sector. At the same time, visible is a significant share, especially within the academic bloc, of people with Humanities and Social Sciences degrees, having very limited chances of finding a job corresponding to their qualification. Thus even under the current crisis conditions, the slowing down of the outflow from the RF and a substantial return migration can be expected. ● Both flows were characterized by the sharp increase of emigration following a particular political event (the start of the invasion; the mobilization announcement) that reached its peak within weeks, quickly declining afterwards. Visible are also the differences between the two flows that emerged in the aftermaths of the developments of February and September 2022. In particular: ● A noticeable discrepancy exists in terms of their scale and gender structure: the first of the flows was on a level of 100,000–150,000 and was relatively balanced in gender terms. Frequently moving were whole families with children. The second one, which followed Putin’s mobilization announcement, was heavily dominated by young males. This by itself creates significant demographic and labor problems for Russia. ● The initial flow was directed first of all towards the countries neighboring Russia, with a relatively positive attitude towards the migrants. The second one, which started in September 2022, is taking place under conditions of changing public attitudes and governmental policies towards the RF’s citizens. Many countries, first of all in Eastern Europe and the Baltics, now limit immigration from the RF, even in regard to those opposing Putin’s regime. This dynamic could lead to a general change in the direction of migration flows in the foreseeable future. ● The flow of the first half of 2022 was marked by the heavy presence of foreign citizens and those having dual citizenship or some other legal status abroad, who were moving to the countries where they had such a status. The participants in the second flow, primarily RF citizens, would encounter additional legal problems in the receiving countries. ● The participants in the original flow included large numbers of people working in the Russian offices of the transnational companies that were relocated with their personnel to other countries – these people had some social guarantees, experience of work for a TNC, and could rely on their companies’ support. People coming in the newest waves lack these advantages. ● Migrants that came in large numbers to countries with a relatively weak infrastructure and limited economic capacity (Eastern Europe, the Baltic states, countries of the Transcaucasus and Central Asia), created significant pressure on their economies and labor markets. The current waves of migrants increasingly encounter competition, economic hardships, and negative public attitudes in the receiving states. While there exists a huge discrepancy in terms of the current migration scale estimates among various sources and governmental agencies both in Russia and the migrant receiving countries, it is clear that the most recent flow turned out to be much larger than the one in the first half

106  The Elgar companion to the Eurasian Economic Union of 2022. Overall, the new migrant diaspora can be estimated at around 700,000 or more.35 This figure represents a substantial potential loss – particularly for Russia and Belarus, experiencing population decline and labor shortages. This is especially so considering the skewed gender, age, and qualification structure of the current migrant outflow. Besides that, the events of 2022–23 have significantly changed the character of elite employment in the RF and, to a lesser extent, Belarus: many Western companies left, closing or relocating their offices abroad. Nevertheless, at least at this time, neither the Russian nor Belarusian leaderships show any willingness to change their policies, perceiving the current migration outflow as even useful politically, ridding them of the war and the regime opponents and consolidating their hold on power. For the other EAEU members, Kazakhstan, Kyrgyzstan, and Armenia, this flow, regardless of its social and economic costs, represents a potential advantage, bringing valuable labor resources and political and demographic benefits as well as significant changes in the dynamics of regional migration.

7.6 CONCLUSION Some of the problems in the social and labor market spheres which the Russian Federation and other EAEU countries are facing now are far from unique. In part, they are typical for the post-imperial systems’ dynamics as well as the evolution of the regional economic blocs that include countries with significantly different levels of incomes and economic development. Still, an unusual feature of the situation is the fact that the Soviet dissolution and the formation of principally new migration flows have taken place simultaneously with the collapse of the Communist planned economies and welfare states and the formation of new systems, involving many elements of the market as well as state capitalism in countries whose states and societies were institutionally and psychologically not prepared for a labor market and large scale migration of culturally different migrants. The creation of the EAEU has simplified the movement, employment, and settling within its borders for the citizens of the union member states. Meanwhile, while Russia remains the main migrant receiving country both in the EAEU and the post-Soviet region in general, the position of other union members within the migration chain has evolved in recent years, with Kyrgyzstan remaining the only clear-cut migration donor. Still, even Kyrgyzstan lags way behind Uzbekistan and Tajikistan as a regional source of migrant labor. In this sense, the EAEU does not fully realize its potential role as a migration enhancement and labor supply mechanism. Most recently, additional complications emerged, related to the COVID-19 pandemic and the war in Ukraine. These, along with the introduction of massive international economic sanctions have visibly impacted the labor market, slowing down migration to Russia. Visible also is the change in the direction of migration flows, including the formation of principally new ones: from the RF to a number of post-Soviet states and even some Global South countries. Time will tell how durable these changes are and what will be their long-term socio-economic impact.

35 See, for instance, ‘Forbes: posle ob’iavleniia mobilizatsii Rossiiu pokinuli primerno 700 tysiach chelovek’. Kommersant, October 4, 2022. https://​www​.kommersant​.ru/​doc/​5594533.

Labor markets and migration  107

REFERENCES Bondarenko, K. (2020). Masshtaby vliianiia pandemii na ekonomiku stran – netto-poluchatelei denezhnykh perevodov [The impact of the COVID-19 pandemic: The case of remittance recipient countries]. Vestnik Mezhdunarodnykh Organizatsii [International Organizations Journal], 15(3). https://​ cyberleninka​.ru/​article/​n/​masshtaby​-vliyaniya​-pandemii​-na​-ekonomiku​-stran​-netto​-poluchateley​ -denezhnyhperevodov/​viewer. Chudinovskikh, O. S. (2004). O kriticheskom sostoianii ucheta migratsii v Rossii. Voprosy Statistiki, 10, 27–36. Denisenko, M., & Mukomel, V. (2020). Trudovaia migratsiia v Rossii v period koronavirusnoi pandemii [Labor migration in Russia during the coronavirus pandemic]. Demograficheskoe obozrenie [Demographic Review], 7(3), 84–107. https://​demreview​.hse​.ru/​article/​view/​11637. Dezhina, I., Kuznetsov, E., & Korobkov, A. (2015). Razvitie Sotrudnichestva s Russkoiazychnoi Diasporoi: Opyt, Problemy, Perspektivy. Moscow. http://​russiancouncil​.ru/​upload/​Report​-Scidiaspora​ -23​-Rus​.pdf. Eurasian Development Bank (2022). Ekonomika Tsentral’noi Azii: Novyi Vzgliad. Almaty-Bishkek-Moscow. https://​eabr​.org/​analytics/​special​-reports/​ekonomika​-tsentralnoy​-azii​ -novyy​-vzglyad/​. Federal’naia sluzhba gosudarstvennoi statistiki (2021). Rossiia v Tsifrakh – 2020. Moscow. https://​gks​ .ru/​bgd/​regl/​b20​_11/​Main​.htm. Federal’naia sluzhba gosudarstvennoi statistiki (2022). Russian Statistical Yearbook 2022, 497–500. https://​rosstat​.gov​.ru/​storage/​mediabank/​Ejegodnik​_2022​.pdf. Gimpelson, V. E., & Kapeliushnikov, R. I. (Eds.) (2006). Nestandartnaia Zaniatost’ v Rossiiskoi Ekonomike. Moscow: Izdatel’skii Dom GU VShE. Gimpelson, V. E., & Kapeliushnikov, R. (2020). Karantinnaia ekonomika i rynok truda [Quarantine economics and the labor market], ECONS, June 2. https://​econs​.online/​articles/​ekonomika/​k​arantinnay​ aekonomika​-i​-rynok​-truda. Goskomstat SSSR (1991). Natsional’nyi sostav naseleniia SSSR. Moscow: Finansy i statistika. Korobkov, A. V., & Zaionchkovskaia, Z. A. (2012). Russian brain drain: Myths v. reality. Communist and Post-Communist Studies, 45(3–4), 327–341. Mkrtchian, N., & Florinskaia, Y. (2021). Migratsiia: osnovnye trendy yanvaria–fevralia 2021 goda [Migration: Main trends in January–February 2021]. Monitoring ekonomicheskoi situatsii v Rossii. Tendentsii i vyzovy social’no ekonomicheskogo razvitiia [Monitoring of Russia’s Economic Outlook. Trends and Challenges of Socio-Economic Development]. No. 10 (142). Mukomel, V. I., & Pain, E. A. (Eds.) (2006). Nuzhny li Immigranty Rossiiskomu Obshchestvu? Moscow: Fond ‘Liberal’naia missiia’. Poletaev, D., & Korobkov, A. (2021). International Migration in Pandemic Times: Disrupted Links, Remittances and Migrantophobia. Valdai Discussion Club Report. August, p. 10. https://​valdaiclub​ .com/​files/​35244/​. UN (2015). Trends in International Migration Stock: The 2015 Revision. New York: United Nations Department of Economic and Social Affairs, Population Division. Vishnevskii, A. G. (Ed.) (1997). Naselenie Rossii 1996: Chetvyertyi Ezhegodnyi Demograficheskii Doklad. Moscow: Tsentr demografii i ekologii cheloveka, Institut narodnokhoziaistvennogo prognozirovaniia RAN. Vishnevskii, A. G. (Ed.) (2000). Naseleniie Rossii 1999: Sed’moi Ezhegodnyi Demograficheskii Doklad. Moscow: Tsentr demografii i ekologii cheloveka, Institut narodnokhoziaistvennogo prognozirovaniia RAN. Vishnevskii, A. G. (Ed.) (2006). Naseleniie Rossii 2003–2004: Odinnadtsatyi-Dvenadtsatyi Ezhegodnyi Demograficheskii Doklad. Moscow: Nauka. Vishnevskii, A. G. (Ed.) (2011). Naseleniie Rossii 2009: Semnadtsatyi Ezhegodnyi Demograficheskii Doklad. Moscow: Vysshaia Shkola Ekonomiki. Zakharov, S. V. (Ed.) (2022). Naseleniie Rossii 2019: Dvadtsat’ Sed’moi Ezhegodnyi Demograficheskii Doklad. Moscow: Izdatel’skii dom Vysshaia Shkola Ekonomiki.

8. Crisis finance in Eurasia: the Eurasian Fund for Stabilization and Development Barbara Fritz and Laurissa Mühlich

8.1 INTRODUCTION Regional cooperation has increased significantly during the last decades, not only economically via increasing South–South trade, but also in monetary and financial terms. Since the end of the Bretton Woods system, the global monetary and financial system does not sufficiently contain economic volatility (Cohen, 2000). Forming regional economic and monetary blocs can be understood as a possible response to a missing global shield against economic and financial volatility. Regional financial arrangements (RFAs) are a form of monetary and financial cooperation that aim at shielding the region against financial volatility. The Eurasian Fund for Stabilization and Development (EFSD) is one of them. This chapter examines the EFSD as an institution nested in the broader economic regionalization efforts of the Eurasian Economic Union (EAEU). We first position the EFSD within a global context of multilateral financial mechanisms and especially in comparison with similar RFAs between developing economies and emerging markets. We elaborate on the criteria of lending capacity, lending policies, and governance mechanisms of RFAs to locate the EFSD among other regional mechanisms of its kind in other regions. In the third part, this chapter shows how EFSD member countries utilize their RFA in times of balance of payments difficulties, and evaluates the current role of the EFSD in preventing and backstopping financial crises in Eurasia. As far as we can see at this moment, it seems that the ongoing Russian war against Ukraine has not affected the EFSD’s functioning as a regional financing entity. Yet, its repercussions may include a further strengthening of China’s financial influence in the Eurasian region.

8.2

LITERATURE REVIEW

The logic of formation of economic blocs aiming at reducing volatility fully applies to the Eurasian region, which, since the global financial crisis, not only started efforts to foster and to harmonize trade, but also created financial mechanisms to strengthen regional economic integration, and to provide backstop in times of financial distress. Varieties of active efforts for monetary and financial cooperation can be observed in different parts of the world. These range from informal policy dialogue to informal or formal regional policy coordination, regional development banks, regional payment systems, regional liquidity sharing mechanisms, regional exchange rate arrangements, and a formal currency union. Some of these regional arrangements nowadays make up part of the global financial safety net (GFSN). This can be defined as the 108

Crisis finance in Eurasia: the Eurasian Fund for Stabilization and Development  109 set of financial resources and institutional arrangements that provide a backstop during a financial or economic crisis. The safety net is a form of insurance against crises that affect a country’s external payments. By addressing this risk to domestic economies, the safety net supports the stability of the international monetary system. (Hawkins et al., 2014, p. 2)

The GFSN has gained options and complexity over time. It contains three1 elements, the global one being the International Monetary Fund (IMF) as one of the founding institutions of the post-Second World War global monetary order of Bretton Woods. Second, and partially due to problems associated with the IMF, since the 1970s regional financing arrangements have been created in different parts of the world. RFAs were set up or expanded in three major waves that have in common the experience of developing countries and emerging markets with an inadequate and insufficient IMF crisis prevention and backstop: (i) during the 1970s as crisis prevention and backstop mechanisms in relation to currency and trade crises; (ii) in reaction to emerging market financial and currency crises at the end of the 1990s; and (iii) by the end of the 2010s, in reaction to the global financial crisis. The EFSD is part of the third wave of RFAs created in response to the global financial crisis that recently reshaped the GFSN landscape. Third, with the turmoil of the global financial crisis, bilateral liquidity support through central bank currency swap arrangements2 emerged, and experienced further diffusion in the current pandemic crisis. The three different layers – the IMF, RFAs and bilateral swap lines each follow their own logic instead of constituting a first-best coordinated mechanism of their different elements. Recent attempts to coordinate these options at the global level have failed so far (Helleiner, 2016; Volz, 2016), but are repeatedly brought forward in the debate (Rajan, 2014; Destais, 2016; Denbee et al., 2016; ESM, 2018). The GFSN landscape keeps enlarging. Besides mobilizing higher volumes of crisis lending, the GFSN elements – such as the EFSD – keep reforming themselves and their lending facilities. At the same time, its theoretical definition is subject to debate. There is no consensus about the precise definition of the set of institutions that the GFSN comprises. In contrast to Hawkins et al. (2014), Scheubel and Stracca (2019), Perks et al. (2021), and Vinokurov and Levenkov (2021) take into account national foreign exchange (FX) reserves as the fourth element of GFSN. In addition, Vinokurov and Levenkov (2021) argue that the GFSN de facto comprises more institutions and agreements than hitherto included. They suggest to consider the crisis finance activities of multilateral development banks and bilateral credits as important elements of the current international financial architecture to provide comprehensive anti‐ crisis and macroeconomic stabilization support. The activities of multilateral development Literature on the GFSN commonly also refers to foreign exchange reserves as a fourth component. Here, we do not include foreign exchange reserves as a GFSN component for two reasons: First, standard economic literature shows that in all types of balance-of-payments crises in emerging markets and developing countries, the third-party actor must come from outside the country and provide timely, voluminous liquidity with smoothly-decided conditionality for crisis prevention and backstop (Obstfeld, 1996). Second, we assume that the crisis prevention and backstop capacity of foreign exchange reserves only holds when they are maintained, otherwise they will be rapidly depleted. Empirical investigations into the role of foreign exchange reserves as crisis prevention and backstop shows that the intervention of an external third-party actor is indispensable to backstop a financial crisis. In fact, regional funds and currency swaps dominate national foreign exchange reserve accumulation as a precautionary measure (Aizenman and Pasricha, 2010; Aizenman et al., 2011). 2 Swaps are mutual contracts to temporarily provide liquidity in foreign currency between two central banks. 1

110  The Elgar companion to the Eurasian Economic Union banks and of bilateral credit and central bank currency swaps are particularly important in this region. Gallagher et al. (2020) also suggest a broad definition of the GFSN that would include bilateral credit facilities, and additionally national policies such as capital flow management to the set of GFSN elements (Shafik, 2015). After locating the EFSD in the GFSN, we turn to locating the EFSD in the mechanics of existing regional financing arrangements between developing countries and emerging markets. Preventing short-term balance of payments problems is a necessary condition for buffering volatility. Developing countries have since the last decade exerted considerable efforts to accumulate foreign exchange reserves, partly as a means of self-insurance against external shocks. While RFAs have always been seen as an alternative to a supposedly missing global mechanism designed to achieve macroeconomic stability and development, the specific motivation to cooperate through the regional sharing of liquidity has changed over time. We observe three different phases: Initially, RFAs were motivated by the need to develop alternative financing mechanisms to declining international capital inflows during and after severe debt crises – at the end of the 1970s, the Arab Monetary Fund (AMF) and the Latin American Reserve Fund (FLAR) were founded as regional self-insurance mechanisms. Second, the series of financial crises in emerging economies at the end of the 1990s led to the perception that independent regional crisis prevention would be needed in order to avoid inadequate conditionality by IMF programs – the Chiang Mai Initiative (CMI) was launched. Third, in the face of the volatility caused by the global financial crisis, more voluminous crisis lending capacity was built up regionally – the CMI was enlarged to today’s Chiang Mai Initiative Multilateralization (CMIM), the South Asian Association for Regional Cooperation set up a regional currency swap framework, too, the transregional Contingent Reserve Agreement (CRA), founded by the BRICS countries as part of the New Development Bank, and the Eurasian Fund for Stabilization and Development (EFSD) (at that time known as the Eurasian Anti-Crisis Fund (ACF)) was set up in response to global financial volatility in and after the global financial crisis.3 Independently of including accumulated foreign reserves at the domestic level in the definition of the GFSN, pooling foreign exchange reserves with neighboring countries in either a jointly-managed fund or through currency swap arrangements is a more efficient way of self-insurance (Ocampo, 2006). Further, a regional liquidity pool can often be more easily and rapidly accessed than global mechanisms of liquidity provision. However, regional self-insurance mechanisms only work as insurance mechanisms if the pooled resources ­are not drawn on by all member countries at the same time (Eichengreen, 2006). Further to this, regional liquidity sharing is more effective for smaller member countries, as they may benefit relatively more in relation to the size of the regional liquidity fund (Eichengreen, 2006). From this perspective, a certain level of asymmetry in terms of the economic size of partnering countries is helpful. Beyond size, regionally-adapted surveillance and enforcement rules within regional mechanisms are highly relevant not only to ensure the financial sustainability of the fund, but also ownership of the member countries.

Not only emerging markets and developing economies engage in regional reserve pooling. The European Stability Mechanism (ESM) was set up in 2012 as a regional self-insurance mechanism for Europe. 3

Crisis finance in Eurasia: the Eurasian Fund for Stabilization and Development  111 In contrast to most other forms of regional cooperation arrangements, regional economic and policy asymmetries are beneficial to regional reserve pooling since the participating countries’ demand for liquidity should differ in time and volume to avoid simultaneous drawings that would exceed the volume of available pooled reserves (Imbs and Mauro, 2007). As such, regional liquidity sharing may be adopted even at a low level of regional macroeconomic coordination.

8.3

THE EFSD IN THE CONTEXT OF THE EAEU

8.3.1

The EFSD in the Eurasian Economic Union

In order to understand the pivotal role of the EFSD, especially for the smaller economies of the Eurasian region, we first look at the regional integration process.4 The EAEU was founded in 2015 as part of Russia’s effort to stabilize its role as regional political and economic leader in the post-Soviet area. It comprises the member states of the EFSD except Tajikistan. The EAEU is the most recent step in the institutionalization of post-Soviet regional cooperation whose ancestry is the Commonwealth of Independent States (CIS) in the 1990s and the Eurasian Economic Community in the 2000s. From the beginning, the CIS had the aim to form a common economic space in the region. The goals of the EAEU are “to create conditions for stable economic development of the member States in order to improve the living standards of their people; the desire to create a common market […]; comprehensive modernization, cooperation and competitiveness of national economies within the global economy” (EAEU Treaty 2015, §4). So far, the EAEU represents a customs union that provides for a common market of the member countries. As one of the further reaching goals of Eurasian regionalism, a regionally coordinated monetary policy is envisaged that could eventually provide for a single currency (EAEU Treaty 2015, §64). In order to achieve the goal of a monetary policy coordination, ambitious preconditions for each member country are set, such as certain thresholds of debt-to-GDP ratio, inflation rate and budget deficit for member countries. Enforcement mechanisms do not exist. Until now, member states do not comply with the set threshold levels since the establishment of the EAEU, just like most regional monetary integration projects between developing and emerging market economies (for a comparison and evaluation of similar regional monetary cooperation initiatives and their respective challenges see Mühlich and Fritz, 2022). The stipulated milestones to reach by member countries in terms of macroeconomic criteria may not be adequate for the rather diverse member countries in terms of GDP per capita, economic structure and vulnerability to exogenous shocks especially stemming from volatile commodity prices and hence seem not to enhance the way towards coordinated monetary policies in the region. Nevertheless, the regional bloc is characterized by rather intensive collaboration at the financial level. Beyond the regional development bank, the Eurasian Development Bank (EDB), and the regional financing arrangement EFSD, bilateral loans, debt forgiveness or grants by Russia to smaller member countries usually make it possible to mitigate a country’s budgetary and debt vulnerability (Vinokurov and Levenkov, 2021, p. 19).



4

See Chapter 3 of this Companion.

112  The Elgar companion to the Eurasian Economic Union While a regional liquidity fund like the EFSD cannot support harmonization of macroeconomic and monetary policies in particular, the existence of balance of payments support for the region enhances crisis prevention and adjustment in case of liquidity crunches in one or several of the member countries’ economies. The reduction of crisis events or their swift resolution is supportive to a stabilizing macroeconomic policy in the member countries. As the regional financing arrangement to the Eurasian region, the EFSD comprises extremely asymmetric membership: on the one side, Russia with about 85% of regional GDP and about 88% capital share in the EFSD that, together with Kazakhstan, is the predominant creditor in the EFSD; on the other side, Tajikistan, the Kyrgyz Republic, Armenia and Belarus as the much smaller economies and member countries are exclusively borrowers or grant receivers in the EFSD. While the strong asymmetries sustain the operations of the EFSD (see above), preventing or swiftly solving financial crisis events cannot be expected to contribute to a harmonization of macroeconomic or monetary policies in the region as envisaged in the EAEU treaty. Rather, it can contribute to ease the coordination of regional monetary policies to which the absence of shocks is an important ingredient. 8.3.2

The Mechanics of the EFSD

In 2009, some of the member countries of the CIS – Armenia, Belarus, Kazakhstan, Kyrgyz Republic, Russia, and Tajikistan – established the Anti-Crisis Fund of the Eurasian Economic Community (ACF) with a funding volume of about USD 8.5 billion. It is set up as a trust fund and managed by the Eurasian Development Bank (EDB). In 2015, along with the liquidation of EurAsEC (as the Eurasian Economic Union became functional) and in order to better reflect its strategic goals, the Fund was renamed the Eurasian Fund for Stabilization and Development. The EFSD was founded under the aegis of the EurAsEC as an immediate response to the global financial crisis in 2008/2009 in order to prepare the region with its own regional IMF-like structure. At its foundation, the Russian finance minister, Alexei Kudrin, explicitly defined the EFSD as an alternative to augmented IMF funding: This fund will be a kind of replica of the International Monetary Fund and the European Bank for Reconstruction and Development. As we know, the IMF provides credit stabilization globally, while the EBRD grants loans for investment projects. It should be noted that Russia has refused to increase the amount of its contribution to the IMF, which would have been used to grant loans to stabilize countries in need around the world. Instead, it creates a regional fund to help its neighbors and allies.5

In this sense, it represents a second generation RFA, founded after a series of financial crises in emerging market economies (see above). Even if it had a catalytic effect on regional integration dynamics in the EAEU (see Vinokurov, 2017), the EFSD is neither an independent institution, such as all other RFAs, nor full part of the EAEU institutional bodies. For the time being, it is managed by the EDB with a volume of USD 8.5 bn. Hence, in contrast to other RFAs, the EFSD is not an independent legal entity. Therefore, EFSD funds are managed by the EDB, whose member states are the same as those of the EFSD. The Russian Ministry of Finance acts as the fund’s depository. The Russian finance minister chairs the highest and

5 See https://​encyclopedia​.pub/​entry/​33011https://​en​.wikipedia​.org/​wiki/​Eurasian​_Economic​ _Community.

Crisis finance in Eurasia: the Eurasian Fund for Stabilization and Development  113 only decision-making body, the EFSD Council, which comprises the member states’ finance ministers.6 Considering the capital shares, Russia has very strong decision-making power (see Table 8.1). However, EFSD legal documents stipulate that major decisions are taken by a 90% majority, a rule that requires Kazakhstan – as the second major creditor country (see Table 8.1) – to vote with Russia to gain a majority. As a rule, however, decisions of the council are made by consensus. Table 8.1

EFSD capital structure

Country

Subscribed capital

Share of total capital

Access limits

(million USD)

(%)

(million USD)

Armenia

1

0.01

1,106.69

Belarus

10

0.12

1,787.73

1,000

11.75

2,043.12

1

0.01

255.39

7,500

88.11

3,149.81

1 8,513.0*

0.01

170.26 8,513.0

Kazakhstan Kyrgyz Republic Russian Federation Tajikistan Total

 

Note: *10% paid-in capital. Source: https://​efsd​.org/​en/​.

While not independent from EDB, the EFSD acts independently from the IMF (ESM, 2018). In exceptional cases, the reform program has been developed under IMF advice. Further, in some cases, emergency liquidity financing is approved as co-lending with other regional or global financial institutions. In fact, due to membership overlap in the Eurasian region, this concerns primarily the Asian Development Bank (ADB), the World Bank, the International Monetary Fund, but also eligibility to European Union balance of payments finance to neighboring countries and partly also the European Bank for Reconstruction and Development. Vinokurov (2021) argues that the shareholder overlap of those institutions with the EFSD as well the overlap in the respective mandate of each institution are supportive to cooperative program implementation in EFSD member countries such as through co-lending or also joint programming. Vinokurov (2021) finds the main interest of EFSD for diversified cooperation with international financial institutions to be the prevention of facility shopping by its member countries. Furthermore, Vinokurov (2021) argues that the institutional set-up of EFSD is quite similar to the one of international institutions EFSD cooperates with. Without being able to observe any kind of power shifts within the EFSD, we find it is possible to argue that both elements – diversified cooperation with international institutions in the implementation of the respective mandates as well as similarities in the institutional set

This governance structure may well be affected by hegemonic aspirations of the Russian Federation as the regionally dominant country. However, it is beyond the scope of this chapter to provide careful analysis of the political economy behind this regional financial mechanism and its embeddedness in the political and military Eurasian project, which became also visible in the collective military intervention in Kazakhstan in January 2022 to fight social unrest by the Collective Security Treaty Organization, a Russia-led military alliance composed of exactly the same member countries joined in the EFSD (see also on EAEU, Gast, 2021). 6

114  The Elgar companion to the Eurasian Economic Union up – might strengthen the EFSD’s bureaucracy to muddle through the massively increased security, political and economic tensions between Russia and the West since the onset of the disastrous Russian war of aggression against Ukraine in 2022. We cannot find any signs that the war has affected either the EFSD’s position in the institutional landscape of regional integration in the Eurasian region or its governance structure as such. EFSD has continued providing short-term financial and long-term investment loans and grants to assist its borrowing member countries with either crisis finance or stabilization finance. A remarkable evolution is the establishment of additional financing mechanisms for technical assistance.7 In the long run, these allow EFSD to open a new business segment. With a new technical assistance window, EFSD options for cooperation with other entities that finance or provide technical assistance, such as national or regional development or investment banks or the World Bank increase remarkably. Thereby, the EFSD could further strengthen its international ties and its own institution-building through close cooperation outside Eurasia which could have a corrective influence on the fund’s decision-making, given its strongly asymmetric membership. While the EFSD’s operating model or mandate had not changed in fundamental ways in the year following the outbreak of the war until the end 2022, at the beginning of 2023, the EDB’s charter capital was redistributed in such a way that Russia loses its majority shareholder position and its veto power for decisions requiring simple majority. Russia’s voting share in the development bank decreased from 65.9% to 44.8% whereas the Russian share was evenly distributed between remaining member countries whose shares increased: Kazakhstan to 37.2% and the borrowing countries’ shares to between 4.3% (Armenia, Kyrgyz Republic and Tajikistan) and 5.2% (Belarus).8 Russia keeps the chairholder position of the Executive Board that can take decisions in case of equality of votes. While these changes in EDB have neither a direct influence on the decision-making structure of the EFSD nor has a redistribution of capital and voting shares in the EFSD been announced at the time of writing, it may pave the way for a redistribution of capital and voting shares in EFSD, too. The EFSD stands out among those RFAs that have the most asymmetric membership and capital contribution and a specifically clear-cut de facto distinction between creditors and borrowers (Mühlich and Fritz, 2022). While Russia provides the lion’s share of the capital to the tune of USD 7.5 bn, Kazakhstan provides USD 1 bn, the smaller EFSD member states Armenia, Kyrgyz Republic and Tajikistan provide a rather symbolic sum of USD 1 mn each to the fund, and Belarus provides USD 10 mn.9 As another unique feature of EFSD in comparison to other RFAs, the EFSD disburses financial credits and investment loans. In contrast to other RFAs, EFSD credit lines are intended not only for stabilization purposes, including balance of payments or budget support, but EFSD also provides infrastructure investment and grants.10 As such, it pursues two mandates in parallel: short- to medium-term stabilization finance and long-term development finance, such as multilateral development banks. Here, we analyze EFSD as a provider of financial

See EFSD strategy 2022–2026: https://​efsd​.org/​en/​about/​documents/​strategies/​. See https://​eabr​.org/​en/​press/​news/​the​-edb​-council​-approves​-a​-redistribution​-of​-its​-charter​ -capital​-among​-the​-member​-states/​. 9 On the asymmetric design of Eurasian regionalism see Chapter 15 of this Companion. 10 Since 2015, the EFSD has announced competitive offers for grants from the fund’s net profit to finance social programs in the borrowing member countries. Since this chapter focuses on crisis finance, an analysis of the EFSD’s grant policy is beyond the scope of this section. For more information see: https://​efsd​.org/​en/​projects/​. 7 8

Crisis finance in Eurasia: the Eurasian Fund for Stabilization and Development  115 credits. Financial credits are concessional policy-based loans.11 Compared to other RFAs, EFSD provides balance of payments finance at relatively long maturities. Financial credits address financial sustainability and structural reforms in member countries (Vinokurov et al., 2019). Reform program implementation is rigorously monitored for disbursement decisions. Investment loans are sovereign lending to support basic infrastructure and big national investment projects. The EFSD only supports projects that cannot be financed from the market on financial terms that are suitable for a given project and at acceptable risk levels.12 EFSD lending decisions are based on the perceived urgency of a country’s financing needs as well as the country’s creditworthiness and long-term debt sustainability. The absorption capacity of the borrower also plays a role. Based on available documentation, Mühlich and Fritz (2018a) find a considerably slower loan disbursement than in other RFAs. Yet, the internal decision time is quicker the lower the loan amount (Table 8.2). Further, the EFSD conditions its lending upon the debt history of the requesting country with the EFSD, its member countries, or other financial institutions. The borrower should not be in arrears with any of those. Financial credits are intended to finance budget gaps and provide support in case of balance-of-payments crises. Table 8.2

Lending conditions EFSD

Instrument

EFSD instruments & conditions Program duration Grace period

Interest rate

Financial Credits (FC) Stabilization credit (low inc.)

20 years / 3 years

5 years

1–3% (fixed)

Sovereign loans (middle inc.)

10 years / 3 years

5 years

LIBOR / Floating Rate*

Investment Loans (IL) Contracted by member state

15 years

5 years

LIBOR / Floating Rate**

Contracted by project company

10 years

5 years

LIBOR / Floating Rate**

Notes: *Rate calculated for each six-month interest accrual and equal to the cost of borrowing for Kazakhstan and Russia on international markets. **For low income countries terms consistent with the requirements of IFI sovereign loans. Requirement for co-financing by recipient: No less than 20% of the amount of the project. Source: https://​efsd​.org/​en/​.

8.3.3

The EFSD as Part of the GFSN

Compared to the volume of liquidity commanded by the IMF, regional liquidity funds obviously provide a much more limited insurance framework. The longest-standing RFAs, the AMF and the FLAR, have a volume of subscribed capital of about USD 3.8 billion and USD 3.9 billion, respectively. At the time of their founding, much smaller borrowing volumes were required. More recently established RFAs that were set up in response to the East Asian crisis and the global financial crisis were equipped with a higher initial volume. The CMIM stands out with the largest volume of USD 240 billion; the BRIC’s CRA amounts to USD 100 billion. Among these second and third generation RFAs, with about USD 8.5 billion subscribed 11 Investment credits are long-term loans to the borrowing member country that are earmarked to investment particularly in infrastructure. The EFSD aims at closing the financing gap for investment projects that cannot raise capital in the market in order to contribute to economic stability and development. 12 See Eurasian Fund for Stabilization and Development Projects (https://​efsd​.eabr​.org/​en/​projects/​).

116  The Elgar companion to the Eurasian Economic Union capital, the EFSD represents a very small initiative. Together with accumulated profit, the EFSD financial resources stand at USD 9.4 billion. The funds’ subscribed capital is available in the form of simple promissory notes. However, whether an RFA’s volume is sufficient for a member country in times of crisis depends not only on its absolute volume, but on the degree of asymmetry, in terms of the economic size of its members. Thus, due to the EFSD’s pronounced degree of asymmetry, at least four of the six members can access comparatively large financing volume from the regional fund (Figure 8.1). This concerns particularly Armenia, but also Belarus, the Kyrgyz Republic, and Tajikistan. This also holds in comparison to the quota and access limits these countries have at the IMF. Additionally, EFSD member states can reallocate access limits to another member state if needed, as exemplified by the first financial credit to Belarus by Russia (Fritz and Mühlich, 2019).

Notes: IMF conditional lending capacity is calculated based on a country’s IMF quota and cumulative access limit; IMF unconditional lending capacity is calculated based on a country’s IMF quota and the maximum multiple for the Rapid Financing Instrument (see https://www.imf.org/en/About/Factsheets/IMF-Lending); EFSD lending capacity is calculated based on access limits on the basis of Table 8.2, see also https://efsd.org/en/; currency swap shows the maximum volume of active currency swap(s) per country in 2020. Source: GFSN tracker (Kring et al., 2020–2021).

Figure 8.1

IMF and EFSD lending capacity per country for three years as % of GDP 2020

Crisis finance in Eurasia: the Eurasian Fund for Stabilization and Development  117 Since its foundation, the EFSD has approved and in their majority also disbursed eight financial credits: 2010 USD 70 million were approved to Tajikistan; 2011 USD 3 billion were approved to Belarus; 2015 USD 40 million were approved to Tajikistan; 2015 USD 300 million approved to Armenia; 2016 USD 2 billion to Belarus. In response to the COVID-19 pandemic, the EFSD approved USD 50 million to Tajikistan and USD 500 million to Belarus in 2020. Again, in reaction to the COVID-19 pandemic, EFSD approved a financial credit to the Kyrgyz Republic of USD 160 million in 2022. In the same period of time, the member countries drew on the IMF more than twice as many times: these were both voluminous conditional credit lines and unconditioned smaller amounts from rapidly disbursing IMF facilities that were temporarily opened up to all IMF member countries in reaction to the COVID-19 pandemic. In some cases, emergency liquidity financing is approved in coordination with other financial institutions or partners, including co-financing arrangements. For example, in Armenia, the EFSD and the IMF co-financed a budget support to stabilize the economy in 2014 and 2015. The IMF set the program objectives and EFSD funded the necessary supporting activities. Additionally, EFSD member countries have been or are partner to more than eight currency swaps with the People’s Bank of China (PBOC); most of these currency swaps have the aim to tighten trade ties with China. The EFSD is thus one of the regional financing arrangements that is in frequent use by its borrowing member countries (Mühlich and Fritz, 2018b). At the same time, EFSD borrowing members make use of not only EFSD resources but also of the other GFSN elements frequently. Fritz and Mühlich (2019, pp. 112) show that this intensive use of crisis finance mechanisms not only at the regional but also at the bilateral and global level is a specific trait of the EFSD member countries’ borrowing behavior. In a number of cases, EFSD member countries have made parallel use of the RFA and swap arrangements. The case of Belarus demonstrates the successive use of all three elements of the global safety net: the EFSD credit disbursement of USD 2.5 billion in 2011 was preceded by an IMF Stand-By Arrangement in 2009 of USD 2.3 billion, which was topped up by a swap line with the PBOC of about USD 3 billion (Reuters, 2009). In 2015, Armenia, Belarus and Tajikistan received the first or full tranches of their respective financial credit from EFSD in parallel to the signing of swap agreements with China, thus making use of both short-term financing elements of the global safety net at the same time. Fritz and Mühlich (2019) conclude that for EFSD member countries, their regional fund represents a complement to the IMF and bilateral currency swaps. In addition, Vinokurov (2021) shows that short-term borrowing by multilateral development banks (MDBs) plays an important role in crisis prevention in the region. The EFSD’s utilization by its borrowing member countries in response to the COVID-19 crisis resembles that pattern of combined use of EFSD and other elements of the GFSN: EFSD lending and grants were an important building block of the Eurasian COVID-19 response but did not live up to its overall lending potential. Armenia already had a conventional conditional IMF stand-by agreement before the COVID-19 pandemic; the Kyrgyz Republic and Tajikistan made use of the new IMF unconditional lending facilities that were reformed in reaction to the pandemic. Except Armenia, the borrowing countries again combined different GFSN elements. Figure 8.2 does not display MDBs and bilateral lending activities that had a substantial share in the COVID-19 response (Vinokurov et al., 2020).

118  The Elgar companion to the Eurasian Economic Union  

Notes: A country’s total crisis financing is the sum of approved loan amount between March 2020 and June 2022 of IMF conditional or unconditional or EFSD loans and the maximum volume of active bilateral currency swap during that period of time. Source: GFSN tracker (Kring et al., 2020–2021).

Figure 8.2

GFSN COVID-19 crisis finance in EFSD member countries as share of total external crisis finance per country in %

8.4 CONCLUSION Even if not fully overlapping in terms of membership, the EFSD is part of the larger family of institutions of regional integration in the Eurasian region. Its embeddedness in the Eurasian Economic Union is not least observable in its governance structure: the EFSD is, for the time being, organized as an “account” managed by the Eurasian Development Bank. The EFSD is not the only intra-regional instrument for financial stabilization. Bilateral direct credit provision by Russia to other countries in the region also plays an important role. Regional integration, even if it does not yet come up to the far-reaching goals of a common market with the long-term goal of establishing a single currency, takes place in multiple fora, including active military cooperation. Given the pronounced intra-regional economic asymmetry, where Russia is by far the largest shareholder, and the legacy of political history, the EFSD differs from other regional funds like the Latin American Reserve Fund or the Arab Monetary Fund that would provide mutual lending among all member countries. Rather, it distinguishes between the major lending countries, Russian Federation and Kazakhstan on the one side and the four smaller borrowing member countries Armenia, Belarus, Kyrgyz Republic, and Tajikistan on the other. Even if some degree of asymmetry in terms of the economic size of partnering countries helps raise the amount of liquidity available in cases of single member countries’ crises, the

Crisis finance in Eurasia: the Eurasian Fund for Stabilization and Development  119 intra-regional asymmetry is especially pronounced in the case of the EFSD, compared to RFAs in other parts of the world. At the same time, the EFSD stands out by its relatively intensive use by the borrowing member countries since its foundation, compared to other RFAs, even though extensive borrowing behavior has not occurred during the acute phase of the COVID-19 crisis. At the same time, this applies also to other regional funds, as most developing and emerging market countries, for the time being, are well supplied by market finance. The EFSD as well as other RFAs may face more loan requests in the coming years due to the COVID-19 crisis and changing global financial conditions that emerge from monetary policy tightening of key central banks. Most remarkable for EFSD member countries is their diverse and complementary use of different sources of the GFSN. The borrowing EFSD member countries, beyond using their regional fund, frequently reach for agreements with the IMF, draw on the Asian Development Bank and lately also the Asian Infrastructure Investment Bank, among others, or agree on extra-regional currency swaps with the PBOC as complements to EFSD loans, mostly to ease trade finance with China, but also to increase financial stability. Typically – and in contrast to other regional fund borrowing behavior – EFSD members repeatedly draw on more than one source, such as EFSD and IMF, or Chinese swap and ADB, in parallel or successively. Based on a comparative analysis of different RFAs and the influence of their governance structure in previous research (Mühlich and Fritz, 2022), we argue that the combined use of EFSD and other crisis finance entities is a consequence of its asymmetric membership in terms of economic and voting shares of member countries that do not derive economic strength from the fund’s governance. The diversified borrowing behavior is remarkable since most borrowers find extraordinary lending capacity in EFSD. Nevertheless, EFSD member countries oftentimes decide to enter into debtor relations with the IMF which is dominated by advanced economies, with a dominant country such as China, or with a regional hegemon at the same time. Such borrowing behaviour creates a complexity that seems to require a case-specific cost-benefit analysis of borrowing each time for bilateral and multilateral sources. Still, due to its sheer large financial size for its small members, the EFSD can be used by its members as a tool for macroeconomic stability in the region. At the same time, EFSD members’ strategy to extensively combine different available lenders can create the risk of facility shopping. This entails, among others, the risk of ineffective crisis response and crisis protraction. Coordination of crisis finance disbursement could make crisis response in EFSD member countries more effective and transparent (ESM, 2018), in particular, due to their complex and diversified way of borrowing crisis finance. In this vein, EFSD already coordinates with IMF in lending operations in some member countries. Nevertheless, addressing the risk of facility shopping by its member countries (Vinokurov and Levenkov, 2021, p. 15) and related concerns of moral hazard behavior remains a challenge for EFSD to maintain sustainable crisis finance, as a country might pick and choose credit where the conditions, in terms of interest rates, conditionalities, etc. might be the lightest. Thus, coordination between the different elements of the GFSN is needed, and the search for a less asymmetric and more independent governance structure might strengthen the EFSD’s position in negotiations of the terms of GFSN coordination, first and foremost with the IMF but also with China. The disastrous war of aggression of Russia against Ukraine poses challenging questions also for the future of Eurasian regional integration and Russia’s role in it. As we have limited information on this ongoing process, we have to speculate, based on the four scenarios proposed in the Conclusion to this Companion: regional institutions could “muddle through”; they could

120  The Elgar companion to the Eurasian Economic Union undergo a hidden transformation; the war could cause a changing balance of power; or the influence of long-term trends underway rather independently of the war might come through in a more pronounced way. At the time of writing (March, 2023), first, we consider the EFSD as a case of “bureaucracy muddling through”. EFSD has continued providing short-term financial and long-term investment loans and grants to assist its borrowing member countries with either crisis finance or stabilization finance in a rhythm similar to the pre-war period. The EFSD’s operating model or mandate had not changed in fundamental ways in the year following the outbreak of the war until end of 2022. Yet, at the beginning of 2023, the EDB’s charter capital was redistributed so that Russia’s share decreases to less than 50%. While no capital redistribution has been announced for the EFSD as of yet, changes in the EDB’s capital shares’ distribution could pave the way for redistributing shares in the EFSD account, too. In this case, the strong asymmetric governance structure of the EFSD may disperse gradually. Second, the close cooperation of the EFSD with international financial institutions outside Eurasia in all of its funding lines (balance of payments stabilization, investment finance, and most recently also technical assistance) may allow sustaining the ability to muddle through: exchange of information, additional capacity building and shared checks and balances in lending operations with entities outside Eurasia might contribute to strengthening the EFSD’s bureaucracy. Third and last, the Russian war might foster the long-term trend of increasing dominance of China in Eurasia, also as a lender to EFSD member countries. Since 2022, China is already actively strengthening its economic and financial ties in the region, for example, through bilateral currency swaps between the respective central banks to ease cross-border trade and investment. The Russian war with Ukraine has led to an increase in US and EU sanctions against Russia. Since China increasingly cooperates financially with countries that are affected by US and EU sanctions to increase the use of local currencies other than the US dollar in international settlements, the tensions between Russia and the West may trigger a tightening of economic and financial ties of China with Eurasia, including the increasing use of the Chinese currency. However, until now we have no precise information to confirm this trend, as, particularly Russia, has stopped disclosing relevant data on these matters.

REFERENCES Aizenman, J., Jinjarak, Y., & Park, D. (2011). International reserves and swap lines: Substitutes or complements? International Review of Economics & Finance, 20(1), 5–18. Aizenman, J., & Pasricha, G. K. (2010). Selective swap arrangements and the global financial crisis: Analysis and interpretation. International Review of Economics & Finance, 19(3), 353–365. Cohen, B. J. (2000). The Geography of Money. Ithaca: Cornell University Press. Denbee, E., Jung, C., & Paternò, F. (2016). Stitching together the global financial safety net (Bank of England Financial Stability Paper 36). https://​t1p​.de/​c7t7. Destais, C. (2016). Central bank currency swaps and the international monetary system. Emerging Markets Finance and Trade, 52(10), 2253–2266. EAEU (2015). Treaty on the Eurasian Economic Union. https://​www​.wto​.org/​english/​thewto​_e/​acc​_e/​ kaz​_e/​WTACCKAZ85​_LEG​_1​.pdf. Eichengreen, B. (2006). Insurance underwriter or financial development fund: What role for reserve pooling in Latin America? NBER Working Paper No. 12451. ESM (2018). IMF-RFA collaboration: Motives, state of play, and way forward: a joint RFA staff proposal. ESM Discussion Paper Series 4, Special Issue.

Crisis finance in Eurasia: the Eurasian Fund for Stabilization and Development  121 Fritz, B., & Mühlich, L. (2019). Regional financial arrangements in the global financial safety net: The Arab Monetary Fund and the Eurasian Fund for Stabilization and Development. Development and Change, 50(1), 96–121. Gallagher, K. P., Gao, H., Kring, W. N., Ocampo, J. A., & Volz, U. (2020). Safety first: Expanding the global financial safety net in response to COVID-19. GEGI Working Paper 37. https://​www​.bu​.edu/​ gdp/​files/​2020/​04/​GEGI​-GDP​_WorkingPaper​_0037​_r01​.pdf. Gast, A. S. (2021). The Eurasian Economic Union: Keeping up with the EU and China. Post-Communist Economies, 33(2–3), 175–199. Hawkins, A., Rahman, J., & Williamson, T. (2014). Is the global financial safety net at a tipping point to fragmentation? Economic Round-Up, 1, 1–20. Helleiner, E. (2016). Legacies of the 2008 crisis for global financial governance. Global Summitry, 2(1), 1–12. Imbs, J., & Mauro, P. (2007). Pooling risk among countries. IMF Working Paper WP/07/132. Kring, W. N., Mühlich, L., Fritz, B., Gallagher, K. P., Pitts, J. D., Marques, M. Z., & Gaitán, N. (2020–2021). Global Financial Safety Net Tracker. https://​gfsntracker​.com/​. Mühlich, L., & Fritz, B. (2018a). Borrowing patterns in the global financial safety net: Does governance play a role? Global Policy, 12, 47–68. Mühlich, L., & Fritz, B. (2018b). Safety for whom? The scattered global financial safety net and the role of regional financial arrangements. Open Economies Review, 25(9), 981–1001. Mühlich, L., & Fritz, B. (2022). Regional monetary cooperation in the developing world: Taking stock. In D. Barrowclough, R. Kozul-Wright, W. N. Kring, & K. P. Gallagher (Eds.), South-South Regional Financial Arrangements: Collaboration Towards Resilience. Cham: Springer Nature, pp. 139–174. Obstfeld, M. (1996). Models of currency crises with self-fulfilling features. European Economic Review, 40(3–5), 1037–1047. Ocampo, J. A. (2006). Regional financial cooperation: Experiences and challenges. In J. A. Ocampo (Ed.), Regional Financial Cooperation. Washington, DC: Brookings Institution, pp. 1–39. Perks, M., Rao, Y., Shin, J., & Steinberg, C. (2021). Evolution of bilateral swap lines. IMF Working Paper, WP/21/210. Rajan, R. (2014). Competitive monetary easing: Is it yesterday once more? Remarks by Dr Raghuram Rajan, Governor of the Reserve Bank of India, at the Brookings Institution, Washington DC, 10 April. Reuters (2009). China sets 20 bln yuan currency swap with Belarus. Reuters, 11 March. https://​www​ .reuters​.com/​article/​china​-belarus​-​idINPEK192​2920090311. Scheubel, B., & Stracca, L. (2019). What do we know about the global financial safety net? A new comprehensive data set. Journal of International Money and Finance, 99, 1–17. Shafik, M. (2015). Fixing the global financial safety net: Lessons from central banking. Speech by Ms Minouche Shafik, Deputy Governor for Markets and Banking of the Bank of England, at the David Hume Institute, Edinburgh, 22 September. Vinokurov, E. (2017). Eurasian Economic Union: Current state and preliminary results. Russian Journal of Economics, 3(1), 54–70. Vinokurov, E. (2021). Interaction of Eurasian and international financial institutions. Post-Communist Economies, 33(2–3), 265–282. Vinokurov, E., Efimov, A., & Levenkov, L. (2019). The Eurasian Fund for Stabilization and Development: A regional financing arrangement and its place in the global financial safety net. EFSD Working Paper 2019/1. Vinokurov, E., & Levenkov, A. (2021). The enlarged global financial safety net. Global Policy, 12(1), 15–23. Vinokurov, E., Levenkov, A., & Vasiliev, G. (2020). Global financial safety net in Eurasia: Accessibility of macroeconomic stabilization financing in Armenia, Belarus, Kyrgyzstan, and Tajikistan. EFSD Working Paper 2020/2. Volz, U. (2016). Toward the development of a global financial safety net or a segmentation of the global financial architecture? Emerging Markets Finance and Trade, 52(10), 2221–2237.

9. EAEU institutions Vladimir Pereboev and Taras Tsukarev

9.1 INTRODUCTION The establishment of the Eurasian Economic Union (EAEU) has been a substantial achievement of its member states, as regional institutional projects of this kind are often hard to get off the ground. The idea of the Eurasian Union dates back to March 1994, when President of Kazakhstan Nursultan Nazarbayev delivered a speech at Moscow State University. He indicated two components of the Union’s future: deep economic integration (this is the main task of the EAEU institutions) and a defence union (partially implemented in the form of the Collective Security Treaty Organization). It took 20 years and a number of false starts to realize this vision for regional integration in Eurasia.1 A breakthrough took place in the late 2000s, in response to the global economic crisis, which resulted in an increase in economic and institutional integration (Vinokurov and Libman, 2014). In October 2007, Russia, Belarus, and Kazakhstan signed the Treaty on the Creation of the Common Customs Territory and Establishment of the Customs Union (CU). Three member states – the core of all future Eurasian integration forms – adopted an action plan to ensure the free movement of goods among the members, facilitate trade with third countries, and develop economic integration. On 19 December 2009, in Almaty, Kazakhstan, the presidents of Russia, Kazakhstan, and Belarus signed a joint statement on the establishment of the Customs Union. On 1 January 2010, a single customs tariff took effect. The CU is perhaps the first post-Soviet initiative that has the character of a truly supranational institution. The decision-making process at the CU level was active from the very beginning and had a real impact on trade. Organizational support for the CU Commission was provided by the entire Eurasian Economic Community (EurAsEC) Secretariat, which was then located in Almaty and Moscow. The determination and constant attention of the political leaders of the member countries played a huge role; without them, the CU would probably have stalled due to national bureaucracies. On 1 January 2012, 17 agreements took effect as a platform for the Single Economic Space (SES). They set out regulations on a number of key economic cooperation issues for the three countries, from coordinating macroeconomic policy to labour migration. SES agreements supplemented the norms of the CU and became the legislative basis for the Treaty on the EAEU and its annexes. The Treaty on the Eurasian Economic Union came into force on 1 January 2015. The EAEU “family” of institutions was formed: the Supreme Eurasian Economic Council (“Supreme Council” or SEEC), the Eurasian Intergovernmental Council (“Intergovernmental Council”), the Eurasian Economic Commission (“Commission” or EAEC), and the EAEU Court. This chapter reviews the functioning of these institutions and their role in the EAEU.



1

See also Chapter 3 of this Companion.

122

EAEU institutions  123 The structure of this chapter is as follows. First, we review the literature on EAEU institutional development. Then we focus on the Treaty of the EAEU as the Union’s legal framework. This is followed by a detailed discussion of EAEU governing bodies, formal and informal decision-making, recruitment policies, and the personnel composition of the bureaucracy. There is a separate section on the EAEU Court. In the last section, we provide an outlook for the institutional development of the EAEU.

9.2

LITERATURE REVIEW

Institutional development of Eurasian integration has been considered by a number of academic and expert studies. One of the first comprehensive studies was by Vinokurov and Libman (2012), who provided a detailed account of various aspects of Eurasian integration, including formal intergovernmental cooperation among countries of the former Soviet Union, as well as economic and political linkages at the subnational, national, and transnational levels. Dragneva and Wolczuk (2013) analysed the Customs Union of Russia, Kazakhstan, and Belarus, the predecessor to the Eurasian Economic Union, in a systematic and comprehensive way. The authors sought to explain the driving forces behind the development of the CU and its origins, institutional architecture, and the implications of the CU for the region. However, the research covered only the early years of the CU. When their book was published, the processes taking place within the CU and how exactly the integration mechanism worked were still unclear. Detailed analysis of the Customs Union was also presented by Vymyatnina and Antonova (2014), who used an econometric analysis of business cycles and cointegration analysis to evaluate the organization. However, they only studied the initial stage of the CU, leaving the institutional and political aspects outside the scope of the investigation. This gap was filled by Vinokurov and Libman (2014), who investigated the effect of economic crises on the development of economic and institutional integration in the case of the Belarus, Russia and Kazakhstan Customs Union. The authors noticed that the actual integration effort goes up only when a crisis has followed a prolonged period of economic growth, i.e. the countries have accumulated sufficient reserves and kept strong ties, helping them not to use protectionist measures to compensate for the decrease in budgetary revenue. The year after the creation of the EAEU, Vasilyeva and Lagutina (2016) assembled various points of view regarding Eurasian regionalism, mainly from the Russian academic community. The authors gave brief descriptions of integration processes in post-Soviet space, Eurasian regionalism and its political perception, especially in individual countries, as well as reflections on Russian interests in the region. The researchers offered a short summary of the evolution of Eurasian organizations, basic facts about the EAEU and its policies, and analysed the opinions of experts and politicians about the EAEU. The institutions of Eurasian integration have been analysed by the Finnish Institute for International Affairs, whose experts conclude that the Eurasian Economic Commission (EAEC), as the EAEU’s official executive body, enjoys more independence than is commonly acknowledged and that Russian pressure on decision-making is not absolute (FIIA, 2014). On the one hand, the main challenge here is the limited supranational power of the EAEC, because any member state at the level of ministers/heads of governments/presidents can veto its decisions. Any decision will be implemented only if the heads of state in the Eurasian

124  The Elgar companion to the Eurasian Economic Union Supreme Economic Council agree and instruct their national bureaucracies to proceed. Then the classic principal–agent problem occurs, of bureaucracies ignoring these instructions, as well as the effect of weak formal institutions, notably the rule of law, in putting them into effect. At a deeper level, the fear of some member states of liberalizing too fast is slowing the implementation process, according to the FIIA study. On the other hand, the EAEC has proved its effectiveness in a number of areas, stimulating national governments to develop better policies. In addition, FIIA experts evaluated the EAEC’s consulting committees in the areas of taxation and financial markets as important instruments for greater inclusion of the business community in the decision-making process. Libman and Furman (FIIA, 2019) concluded that the development of regional integration projects had three distinct phases. Geopolitical trends resulted in (1) transformation of post-Soviet intergovernmental institutions, aspiring to create a kind of “Eurasian EU” in the 1990s, then to (2) Russia-led integration projects in the 2000s, followed by (3) a focus on EAEU development as a main project since 2014, using China and not the EU as a benchmark. Given that some elements of the EAEU have reached a genuine supranational level, the results achieved are likely not only to be preserved, but even developed further – partly because of Russia’s political will to do so, and partly due to purely bureaucratic mechanisms. Experts also point out that the EAEU is mostly a result of “imitating regionalism”, as shown by the weakness of the EAEU Treaty and the EAEU Court in comparison with their predecessors – the Customs Union Treaty and the EurAsEC Court; by the lowered attention of Russian leaders to the EAEU in their official rhetoric; and by the cautious position of Kazakhstan, limiting the development of Eurasian integration and its institutions. Rilka Dragneva and Kataryna Wolczuk take this sceptical position, maintaining that there is a problem of formal equality within the institutions of the EAEU, which coexists with informal means of influence, especially Moscow’s shadow influence in the EAEC (Chatham House, 2017). Another study by Alexander Libman and Evgeny Vinokurov considered the EAEC a good example of how the new institutions of Eurasian regionalism were constructed, including because Russia’s position in the EAEC and even Russian domestic legislation were overruled by the supranational bureaucracy (Vinokurov and Libman, 2012). At the same time, the authors of the LSE IDEAS think tank report on Greater Eurasian Partnership, especially Rilka Dragneva-Lewers, highlight the problem of limited delegation of powers to the EAEC. Unlike the European Commission, the EAEC is not empowered to action its own decisions and has to act only as a “supporting manager” of the member states in their own negotiations. Moreover, in areas where delegation of national powers has not occurred, such as transport, services, or investment, the EAEC is not part of the negotiations at all. Instead, the approach adopted by the EAEU is for negotiating teams to be put together by the member states’ representatives under Russia’s general leadership, with the Commission acting only as a facilitator. Thus, in formal terms, not only does the EAEU not function as a unified actor, it is also subordinate to its member states even in areas of delegated authority (LSE IDEAS, 2019). Our position correlates with those who expect the EAEU and its working institutions to be “normal”, not an exception to the rules of regional integration, as, for example, Evgeny Vinokurov underlines in his Introduction to the Eurasian Economic Union (Vinokurov, 2018). His book covers important topics that are often missing in other books, including the history of post-Soviet integration in 1991–2016, economic ties within the post-Soviet space, and public perception of Eurasian integration. It provides a systematic review of various points of view regarding the development and prospects of Eurasian integration.

EAEU institutions  125 Some experts propose an analytical model that represents the formation of regional institutions as a specific process shaping the post-Soviet region (Russo, 2018). Russo argues that states’ characteristics and actions (and the way they are engaged in their own internal definition and structuring) define regional institutions, norms, and practices, and are in turn defined by them. For example, Russia can be defined as the main regional builder, but setting out from a condition of non-statehood or early statehood, being subjected to transformative pressures in the wake of Soviet dismemberment, like the other post-Soviet countries. Obydenkova and Libman (2019), in their research on non-democratic regional organizations, discuss the link between the institutional structure of the EAEU and the aims of “autocracy diffusion”, as well as the impact of regime transition trajectories, economic interests and geopolitical concerns of the member states on institutional development.2 Additionally, integration is undertaken to improve the position of countries (mainly small economies) in the global environment, while consolidating regime control and enhancing state capabilities, as Mukhametdinov underlines (2020). He also highlights the asymmetries of size, power, and interests among member states, both in the EAEU and the EU, which provide the omnipresent context for decision-making, stressing that economic interest groups in the EAEU are weak.3 While this literature looks at the institutional development of the EAEU in general, it is amazing how little research has been done so far on the specific governance practices of the EAEU bodies. Staeger and Bobocea (2018) are among very few exceptions, documenting the role of the EAEC bureaucracy in the EAEU integration process using the theoretical framework of mimesis (bureaucratic learning). The lack of research is puzzling, given how important studies on bureaucratic authority are in research on other regional organizations. Russian sources explore the problem of weakness of the EAEU institutions and mostly recommend widening the EAEC mandate and creating new supporting structures, such as an independent high-level expert committee of the EAEU, which would consist of leading analysts from the member states of the Union, as well as a common independent Eurasian rating agency within the EAEU. Influential Russian experts attribute such institutional imbalances to the fear of elites about the hypothetical loss of recently acquired and still fragile sovereignty, as well as the low executive culture of the EAEU countries at the level of coordination and implementation of decisions of the EAEU bodies with the ministries of the member countries (Karaganov, 2018). The latest publications, which reflect the economic realities of 2022, provide quite strong arguments in favour of the anti-crisis function of the EAEU institutions, as it existed during the pandemic. For example, in a recent article, Myasnikovich and Kovalev (2023) voice an official view of the EAEU bureaucracy noting the timeliness of the prompt measures to increase the stability of the economies of the EAEU countries, which made it possible to mitigate the impact of sanctions on the economies of the Union. The authors also emphasize the active work of the EAEU bodies, which adopted about 700 decisions and recommendations during 2022, while strengthening the Union’s legal foundation and its institutions.



2 3

See also Chapter 14 of this Companion. See Chapter 15 of this Companion.

126  The Elgar companion to the Eurasian Economic Union

9.3

ЕAEU TREATY

The Treaty on the Eurasian Economic Union is the main legal document of the EAEU, signed by the presidents of Belarus, Kazakhstan, and Russia in May 2014, enacted in January 2015, and then acceded to by Armenia (in January 2015) and Kyrgyzstan (in May 2015) (EAEU Treaty, 2014). The Treaty establishes the Union’s international legal personality, its jurisdiction, the main operational principles and objectives needed for creation of a single market for goods, services, capital, and labour within the Union, for sustainable economic development of the member states and competitiveness of national economies within the global economy. Besides the Treaty, the law of the Union includes international treaties within the Union, international treaties of the Union with third parties, and decisions and directives of the EAEU’s supranational bodies. The Treaty establishes common customs regulations, the Common Customs Tariff of the Union, free movement of goods among the territories of the member states without the use of customs declarations and state control (transport, sanitary, veterinary-sanitary, phytosanitary quarantine), and common measures regulating foreign trade with third parties. The Treaty stipulates EAEU member states’ right to apply exemptions and restrictions in mutual trade, if necessary, but on a non-discriminatory basis. As before, there are a large number of barriers to mutual trade between the Union’s member states that cannot be removed quickly, especially in sensitive segments of the national economies. That is why the Treaty provides transitional periods for the elimination of these barriers and preparation for the operation of single or common internal markets in various segments (EAEC, 2015). Section IX of the Treaty, devoted to the EAEU foreign trade policy, is one of its foundational sections, which specifically regulates the Union’s conclusion of free trade agreements and participation in international organizations, as well as the foreign trade policy measures and mechanisms that member states may employ autonomously. This section also deals with trade with developing and least-developed countries by means of a single system of tariff preferences with respect to the goods supplied from such countries (EAEC, 2021b). Importantly, the Union lacks supranational jurisdiction in the coordination of trade in services and making investments under agreements with third parties. For now, these matters remain part of the national competence of EAEU member states. Additionally, the Treaty regulates the elimination of restrictive measures from third parties in trade with the EAEU and application of the Union’s response measures. Both of these are within the jurisdiction of the EAEC. However, member states have the right to apply response measures unilaterally on the basis of international treaties they concluded with a third party before the EAEU Treaty took effect. Moreover, individual member states may apply non-tariff regulatory measures, safeguards, and anti-dumping, countervailing, and other measures to protect the internal market within external trade relations. The agreed macroeconomic policy and currency policy within the Union focus mainly on realizing the EAEU’s integration potential and each member state’s specific advantages, creating conditions to improve internal stability and immunity to external influence. The Union’s Treaty guarantees freedom of trade in services, business activities, establishment of legal entities, and investment activities within the territory of the Union. In all of these matters, member states give each other national treatment or “most favoured nation” status, which are applied also to tax interactions and the banking and insurance sectors. However, each country has the right to apply individual restrictions. The Treaty’s Appendix contains an

EAEU institutions  127 imposing list of “horizontal” restrictions retained by EAEU countries. The SEEC approves additional national lists of exemptions, restrictions, requirements, and conditions. The Treaty regulates the implementation of a coordinated energy policy, and the formation of common markets for the energy resources (electricity, gas, oil and oil products) of member states until 1 January 2025. EAEU states must conclude corresponding international treaties to form such markets with common principles for price-setting and tariff policy, promotion of good-faith competition, and development of the relevant infrastructure. Common markets already function for pharmaceutical products and medical devices, which assume uniformity in requirements, rules, and methods concerning the circulation of these goods within the common customs territory of the EAEU. From 1 January 2021, new pharmaceutical products and medical devices without valid registration certificates of the EAEU member states can only be registered in accordance with the rules approved by the EAEC (EAEC 2021a). Finally, the Treaty regulates coordinated or agreed transportation and agro-industrial policies. The EAEU Treaty covers all key aspects of the routine and long-term economic interaction of member states, specifies areas for expansion of the EAEU, and reflects the full complexity of the integration process. However, the large number of stipulated restrictions, including with respect to the jurisdiction of Union bodies, long transitional periods for integration of national industrial markets, and the rather watered-down and at times contradictory wording of provisions leave member states with the ability to deviate from several of the Treaty’s regulations, if they deem it necessary. For example, consumers interested in purchasing imported goods at dumping prices have the opportunity to appeal to their governments with a request to veto an anti-dumping measure and suspend it. According to various estimates, a member state of the Union blocks one out of every four measures within the EAEU. So far, the prime ministers of the EAEU countries within the framework of the Intergovernmental Council have failed to reach specific agreements on common approaches to anti-dumping and countervailing measures, taking a timeout for bilateral negotiations (Kryuchkova, 2021). In terms of technical regulation, the EAEU Treaty prescribes the principle of preventing excessive barriers to doing business, as well as the principle of voluntariness in the application of standards and the uniformity of application of technical regulations, regardless of the types and characteristics of transactions. But the unwillingness of the member states to abandon national rules and procedures in favour of supranational ones complicates the unification of new areas of technical regulation (Lukyanova, 2019). Other weak areas of the EAEU Treaty include differences in the interpretation by countries of certain provisions on exceptions from the functioning of the internal market for goods when introducing restrictive measures that in fact protect national markets, rather than general ones (Gaevsky, 2019). The Treaty on the EAEU provides for equal rights to work and obtain basic social guarantees for workers of the Union member states. However, there is still no uniform interpretation and application of EAEU law in this area throughout its territory. For example, Russian legislation contains restrictions on the employment of foreign citizens in the absence of a voluntary health insurance contract (policy), valid for the entire duration of the employment contract. These norms contradict the relevant provisions of the Treaty on the EAEU and therefore again show the uncertainty of legal regulation and the need to ensure complete harmonization of legislation on the territory of the Union (Pugacheva, 2019). We should also point out that the state–institutional balance within the Union provides an opportunity for small economies (Armenia, Kyrgyzstan) to influence the decision-making

128  The Elgar companion to the Eurasian Economic Union process. The consensus system allows any state (except observer states) to block decisions that conflict with their national interests and to influence the policies developed by the leading countries. All the member states are equally represented in the bodies of the Union by the same number of ministers. In general, the Treaty on the EAEU acts as a kind of roadmap for the development of the EAEU until 2025. Additionally, in December 2020, a more focused strategic document was adopted – Strategic Directions for the Development of Eurasian Economic Integration until 2025 – and an Action Plan for implementation of the Strategic Directions. We return to this document in the Outlook section. Now we take a look at the intergovernmental institutes.

9.4

EAEU GOVERNING BODIES

Pursuant to the EAEU Treaty, the bodies of the EAEU are: ● ● ● ●

Supreme Eurasian Economic Council (SEEC); Eurasian Intergovernmental Council; Eurasian Economic Commission (EAEC); Court of the Eurasian Economic Union.

In this section, we focus on the first three bodies, which are directly involved in the management of integration, and are considered from the bottom up, that is, starting with the EAEC and ending with the SEEC, in order to reflect the process of promoting and making key decisions in the EAEU. The EAEC, which is a supranational regulatory body of the Union, is responsible for many areas: regulation of foreign trade; technical, customs, tariff, and non-tariff regulation; regulation of sanitary, veterinary, and phytosanitary measures; protection of intellectual property and consumer rights; industry regulation in the production of drugs and medical products, the power industry, and transportation; as well as regulation of the Union’s labour market, the financial sector and services, state (municipal) procurement; and much more (EAEC, 2014). The EAEC’s main tasks are to ensure the conditions necessary for the operation and growth of the EAEU, and to develop proposals (including those coming from member states) to achieve further integration as well as consideration of the national interests of member states. The EAEC adopts decisions that are binding on member states (just as in the European Union) and makes non-binding recommendations. Among its other functions are drafting the international treaties required for the operation of the EAEU, and monitoring member states’ compliance with the decisions and directives of Union bodies and international treaties that comprise the law of the Union. EAEC decisions within its sphere of competence are enshrined in the national law of member countries and do not require additional national legislation to come into force. This does not mean that the member states implement all the provisions of the EAEU treaties automatically: on the contrary, the EAEC keeps a catalogue of existing implementation issues.4 The EAEC Council, which includes ex officio deputy prime ministers of each member country, may overrule the decisions of the EAEC Board. However, if the EAEC Council does



4

See https://​barriers​.eaeunion​.org/​.

EAEU institutions  129 not overrule the decision, the acts of the EAEC become part of the national law without further actions of the member states. The Council of the Commission, which includes one deputy head of government from each member state, provides general leadership of the Commission’s activities and general management of integration processes. The functions and powers of the Council of the Commission include organization of work to improve the legal regulation of EAEU activities, and determination of the main areas for advancing economic integration in the EAEU. In its work, the Council of the Commission relies on the Board of the Commission, which is the EAEC’s executive body. The Board consists of representatives of member states on the principle of equality. Representatives (members of the Board in the status of ministers) are appointed by the Supreme Council, and head up 21 departments on key areas of integration and 22 advisory committees. Officials of the Commission’s departments may not be citizens of the same state. The EAEC selects the candidates for positions in the departments on a competitive basis, taking into account the participation of the Parties (member states) in the financing of the Commission. At the same time, distribution of positions in the EAEU bodies reflects the norms for the distribution of the amounts of import customs duties among the budgets of the member states forming the budget of the Union. According to Appendix 5 to the EAEU Treaty, the distribution of import customs duties is as follows: Armenia 1.22%; Belarus 4.56%; Kazakhstan 7.055%; Kyrgyzstan 1.9%; Russia 85.265%. The EAEC makes all decisions collectively. However, the Council of the Commission makes decisions, directives, and recommendations by consensus, while the Board of the Commission does so by a qualified majority (two-thirds of the votes of all members of the Board), except for decisions on the list of sensitive issues, which is determined by the Supreme Council. The Board makes such decisions by consensus. The Intergovernmental Council, consisting of heads of government of member states, carries out work under ten competences. We will make special mention of the following: ensuring monitoring of compliance with the EAEU Treaty and the decisions of the SEEC; at the request of the Council of the Commission, consideration of issues for which consensus could not be reached at the level of the Council of the Commission; approval of the Union’s draft budgets, as well as consideration of member states’ proposals to cancel or amend decisions adopted by the Commission, which, if necessary, are referred to the Supreme Council. The Intergovernmental Council meets at least twice a year and can override or suspend the decisions of the Board and Council of the Commission. If necessary, member states or the Chairman of the Intergovernmental Council can initiate extraordinary meetings. The SEEC is the EAEU’s highest body and consists of the heads of the member states. The SEEC is responsible for reviewing fundamental matters concerning the Union’s activities, and determining its strategy, directions, and prospects for advancing integration. The SEEC meets at least once a year. Member states or the Chairman of the Supreme Council can convene extraordinary meetings to resolve urgent issues concerning the EAEU’s activities. As in the case of the Intergovernmental Council, the agenda of the SEEC meetings is created by the EAEC on the basis of proposals from member states. The organization of the decision-making process by the EAEC implies close, phased, and coordinated interaction with the relevant ministries and departments of the member states. This ensures the adoption of well-developed and then agreed-upon decisions, taking into account the interests and requirements of the Parties, as well as the best world practices. The decision-making process is as follows. The relevant structural unit of the EAEC considers

130  The Elgar companion to the Eurasian Economic Union the adoption of documents and decisions in close cooperation with representatives of the authorized Parties. Then it prepares a draft act for submission to the meeting of the relevant specialized Advisory Committee and sends it to the authorized bodies of the member states. The specialized Advisory Committee considers and discusses the draft act with the representatives of the EAEC and the authorized bodies of the Parties. At the next stage, the project goes to the relevant structural unit of the EAEC and is finalized, based on the recommendations of the Advisory Committee and taking into account the positions of the Parties. Then comes a stage of the EAEC Board. The special Regulation determines a procedure for the preparation of acts of law of the Union. After consideration at a meeting of the EAEC Board, depending on the specifics, either an act of the Board is adopted, completing the issue under consideration, or an order to approve the act of the Council, in which case the project is submitted for consideration to the EAEC Council. A certified copy of the decision, recommendation or order of the EAEC Council is sent to the ministries of foreign affairs and the governments of the member states. If necessary, the draft decision is submitted to the next meeting of the Eurasian Intergovernmental Council for approval, which, for its part, is authorized to submit some particularly important decisions of a strategic nature to the SEEC for consideration and approval. One can see that the EAEC to some extent has a supranational status and its decisions include norms of direct action that are binding on all states of the Union. However, the Commission cannot make these decisions without the consent of the Parties, each of which can veto them. That is, being supranational in form, the EAEC remained interstate in the essence of decision-making procedures. This entails duplication of functions transferred to the EAEC at the level of national governments, which have retained the corresponding structural units. In fact, the EAEC functions as a supranational structure over the governments of the EAEU states, taking only decisions agreed by them on a consensus basis and working on the agenda approved by them. At the same time, the number of management levels has doubled. The first level over the Commission’s Board is the EAEC Council, consisting of authorized deputy heads of national governments and functioning as an interstate body. The second level is the national governments, which control the EAEC, using, if necessary, the right of veto and personnel appointments. This state of affairs delays many decisions and bureaucratizes the procedures for their adoption, and decreases the effectiveness of the work of the supranational body, which is stalled in disagreements between the Parties (Glazyev, 2020). Nevertheless, due to the dominant commonality of economic interests, it turns out to be possible to find consensus on the overwhelming majority of issues. An important issue remains the expansion of the powers of the EAEC to monitor the execution of decisions of the EAEU bodies and pre-trial resolution of disputes between business entities of the Union countries (Abdildina, 2019). The experience of the European Union is useful here: the European Commission has the right to take direct part in the implementation of penalties in the event that member states fail to comply with decisions of EU bodies. In the EAEU Treaty, however, there is no mechanism for cooperation between institutions and no mechanisms of influence in the event that countries evade implementation of the EAEU bodies’ decisions. However, according to the EAEU Treaty, if conflicts arise between EAEU bodies, the decisions of the SEEC have priority over the decisions of the Intergovernmental Council and the EAEC, and in turn, the decisions of the Intergovernmental Council have priority over decisions of the EAEC. The SEEC and the Intergovernmental Council adopt decisions and

EAEU institutions  131 directives by consensus that are binding on the member states in accordance with their national laws. This means that the decisions of both councils are not actually directly applicable within the EAEU. Instead, they require implementation of additional procedures at the national level, and thus do not have priority over national laws. Finally, during 2022, the EAEU bodies continued to work actively in a business-as-usual approach, without any basic rearrangements, despite the unfavourable economic situation and the temporary restrictive measures imposed by some Union countries. This was, for example, the case for Russia’s ban on the supply of its grain to the EAEU countries from March to June 2022, with the exception of Belarus, which caused discontent in Kazakhstan. But despite such forced measures, all bodies and the high-level working group on improving the stability of the economies of the EAEU countries continued to implement all necessary measures to provide the internal market of the Union with the necessary goods. This indicates, among other things, a sufficient margin of safety and the demand for the existing institutions.

9.5

EAEU COURT

The Court of the Eurasian Economic Union (“the Court”) is a specialized body with jurisdiction over disputes related to the implementation of international treaties within the Union and decisions of EAEU institutions. For instance, its rulings regarding the Single Customs Tariff have direct effect. The Court is situated in Minsk. Over time, the activity of the Court has declined, as has its relative importance, because of its limited mandate. After its establishment, the Court of the EAEU became a unique judicial body in post-Soviet Eurasia, as an international institution where private companies were able to submit complaints against the EAEU bodies and member states. It also considers disputes regarding the implementation of international treaties within the EAEU and decisions of Union bodies. The Court ensures uniform application of EAEU law by member states and Union bodies. It acts on the basis of the Union’s Treaty, the Statute of the Court (Appendix No. 2 to the EAEU Treaty), and Regulations of the Court. It is the procedural successor of the Court of the Eurasian Economic Community (EurAsEC), which played a significant role in shaping the EAEU’s current laws, including laying the foundations for the work of the Court of the EAEU. We should note, however, the noticeable differences in the administrative weight of the EAEU Court, which did not take over the right to force the Union bodies to execute their decisions, which the EurAsEC Court had, for example, in relation to the EurAsEC Customs Union Commission. Two judges from each member state ensure equal representation in the Court of the EAEU. The Supreme Council appoints and dismisses judges. According to the Rules of Procedure of the Court of the EAEU, two judges from two different member states are elected to the positions of presiding judge, who guides the Court’s activities, and deputy presiding judge, for a period of three years. The Secretariat of the Court is formed on a competitive basis, taking into account the participation of the Parties in the budget of the Union from among the citizens of the member states (the same principle as for the EAEC departments’ officials). The Court reviews cases in the Grand Chamber of the Court (all judges), a Chamber of the Court (one judge from each member state), or the Appellate Chamber of the Court. The last one deals with motions to appeal decisions of the Chamber of the Court in a case and is comprised of judges who did not participate in consideration of that case.

132  The Elgar companion to the Eurasian Economic Union According to clause 49 of Chapter IV of the Statute, the Court works with disputes that arise regarding the implementation of Union law, at the request of member states as well as business entities. The Court considers the following types of disputes at the request of a member state: ● disputes regarding the compliance of an international treaty within the Union, or its individual provisions, with the EAEU Treaty; ● disputes regarding compliance of another member state or states with the EAEU Treaty, international treaties within the Union, and/or decisions of the Union’s bodies; ● disputes regarding compliance of an EAEC decision or its individual provisions with the EAEU Treaty, international treaties within the EAEU, and/or decisions of the Union’s bodies; ● challenges to the actions (or omissions) of the EAEC. Disputes considered by the Court of the Union at the request of a business entity are exclusively limited to possible violations of the rights and legal interests of such an entity by the EAEC. It should be understood that a business entity means both a legal entity and an individual registered as a sole proprietor. The Statute of the Court of the EAEU does not explicitly state that the Court is competent to review cases related to the implementation of the Union’s international treaties with a third party. It follows that member states and business entities cannot count on support from the Court if they discover violations of the law under these treaties. However, the Statute of the Court stipulates that member states “may assign to the competence of the Court other disputes whose resolution by the Court is explicitly provided for by the Treaty, international treaties within the Union, the Union’s international treaties with a third party, or other international treaties between member states” (clause 40 of Chapter IV of Appendix No. 2 to the EAEU Treaty). For example, the Free Trade Agreement between the EAEU and Vietnam does not mention the Court of the EAEU. As a rule, a specially created tribunal (arbitration group) settles disputes under such agreements in accordance with WTO regulations. One of the problems faced by the Court is national laws’ priority over the law of the Union if there is a conflict between them, leading to some weakness of supranational regulation in comparison with national (Slutsky and Khudorenko, 2022). Also, the Court, whose decisions are binding, has no real power to force national governments to fulfil their obligations, or to apply sanctions against them if their countries violate the provisions of the Treaty on the EAEU. For example, at present, the priority of the provisions of EAEU law depends on conditions established by the Constitution of Russia and the Constitution of Kazakhstan, and therefore is not absolute throughout the entire EAEU. The Constitution of the Russian Federation stipulates that the provisions of the Constitution shall apply if they provide a higher level of protection of a citizen’s rights and freedoms than the provisions of international law or an international treaty. The European Union had a similar situation, where for roughly 20 years the constitutional courts of Germany and Italy gave priority to national law rather than the acts of the European Community. Thus, Germany did not recognize the supremacy of European regulations until the EU Court expanded human rights laws within the entire Community to a level comparable to that guaranteed by the German Constitution (Chayka, 2016). These are examples of cases where national can improve supranational regulation.

EAEU institutions  133 At the same time, the duality of legal regulation in the EAEU can lead to difficulties. For example, business entities operating in the same field in different member states may be provided with different amounts and levels of benefits and preferences, or the requirements applied to individuals and legal entities in a particular member state may be more stringent than those established by the EAEU Treaty. Statistics of the Court show that the majority of appeals were on dispute resolution (see Table 9.1). Table 9.1 Dispute resolution

Appeals and complaints to the EAEU Court (2015–2022) 2015

2016

2017

2018

2019

2020

2021

2022

Total

6

4

4

3

5

5

13

6

46

–

4

5

5

4

3

3

4

28

statements Clarification statements Complaints

–

5

–

–

2

4

7

3

21

Total

6

13

9

8

11

12

23

13

95

Source: EAEU Court (2022).

During 2015–2022, a total of 58 appeals came from business entities, 22 from the Union’s bodies (mostly the EAEC), and 15 from member states (EAEU Court, 2022). Subjects of dispute resolution and clarification statements were mostly from Russia (36). The appeals considered by the Court during the specified period concerned mainly the functioning of the Customs Union (42) and, to a lesser extent, general principles and rules of competition (10). In 50% of cases, the Court completely denied the claims of the plaintiff. We should also mention the Court’s advisory function, the demand for which will only grow. According to the Statute, the Court clarifies the rules and regulations of EAEU law, as well as the provisions of the Union’s international treaties with a third party, if so stipulated by these treaties, and issues an advisory opinion. For now, requests for an advisory opinion can be submitted either by member states (on issues related to Union law), or employees and officials of Union bodies (on labour relations). Of course, the EAEU law is not static; it continues to evolve together with the Union bodies. There are many problematic issues of the functioning of institutions ahead, including the fairness of the existing principles of decision-making in the EAEU bodies, disproportionately weighted to the contribution of countries to the budget of the Union, the search by the Court for a balance between activism and conservatism in the resolution of international disputes and in the interpretation of the Union’s law, regarding matters of ethics (Neshataeva, 2020), etc. From this point of view, the EAEU is still at the beginning of the road, and some changes can be expected in the future. Nevertheless, success comes with tenacity.

9.6 OUTLOOK In conclusion, while the EAEU has a broad and complex institutional structure, there are a number of institutional restraints that hinder its further development. There are significant difficulties in decision-making processes, since the EAEC is often limited by excessive control and influence on the part of the governments of the Union member states and the higher interstate bodies of the EAEU. Sometimes, the EAEC, although a key institution of the EAEU, has

134  The Elgar companion to the Eurasian Economic Union to serve as just an auxiliary and coordinating platform, providing intellectual, administrative, and organizational support in the implementation of member states’ national foreign economic policies. In addition, the allocation of quotas for key management positions, in which there is often a preponderance of representatives of state bodies rather than independent persons, remains a concern of critics of the EAEC. Similar problematic issues involve the EAEU Court, which still has to put up with limited influence on the activities and decisions of the EAEU bodies. At the same time, the Court is active in helping to develop the Union’s law and the competence of the EAEC. At this point, one ought to mention the key policy document adopted by the governments and presidents of the Union member states in December 2020 – Strategic Directions for the Development of Eurasian Economic Integration until 2025 (EAEC, 2020) – as well as the Action Plan for their implementation, with concrete measures and responsibilities within the EAEC. This document has both strengths and weaknesses. Among the weaknesses is the lack of specifics in new areas of integration, including education, the green economy, tourism, and sports. So far, these areas are limited to finding common approaches, conducting research, and assessing feasibility, which, most likely, will take several years and may get bogged down in bureaucratic procedures and the lack of appropriate powers of the EAEC in these areas. Many expert assessments emphasize the need to expand the powers of the EAEC. At the same time, the Action Plan for the implementation of the Strategy covers almost all tasks with the EAEC, which may not be a completely effective solution. Overall, the Strategic Directions for the Development of Eurasian Economic Integration until 2025 (or “Strategy – 2025”) does not contain the breakthrough solutions that the Union needs. However, this strategic document indicates a number of specific goals, such as reaching the state of full-fledged common markets in sensitive areas for the member states, including the financial and energy markets, a balanced agricultural market, and a common transport space with modern cross-border infrastructure. All areas of cooperation outlined in the Union’s “Strategy – 2025” continued in 2022. Sanctions against Russia and Belarus, while negatively affecting their economy, also became a stimulus to begin shifting logistics and value chains to the East and South of the Eurasian continent. The EAEU institutions have shown the ability to react quickly and take urgent anti-crisis measures to stabilize the single market and the economies of the member states (EAEC, 2022). This applies to the establishment of a parallel import system with tariff protection tools and benefits for critical imports, and creation of new opportunities for transactions in national currencies, including interaction of national payment systems and their coordinated work. Another EAEC decision introduced a mechanism for subsidizing interest rates on loans for integration projects in priority technological sectors. Therefore, recognizing the objective difficulties against the background of crisis events, it can be argued that the Eurasian integration project and its interstate institutions are once again proving their important coordinating and anti-crisis role for all participating countries. Despite the tensions between EAEU countries that sometimes arose during 2022, there are still prospects for the development of the EAEU in various directions. One could expect small economies of the Union to take an increasingly proactive position, although it is possible that they will distance themselves from a number of integration initiatives in the medium term. Nevertheless, we expect that the EAEU institutions will continue their work, and the bureaucratic machine will not stop, but will continue to implement the integration agenda, while adapting the EAEU economic agenda to the new circumstances.

EAEU institutions  135

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136  The Elgar companion to the Eurasian Economic Union rights. Materials of the International conference (19–20 September 2019). The Court of the Eurasian Economic Union”], Minsk, p. 358. Glazyev, S. (2020). O strategicheskikh napravleniyakh razvitiya EAES. Mezhdunarodnaya zhizn’ [International Affairs]. https://​interaffairs​.ru/​news/​show/​25238. Karaganov, S. (2018). EAES: ot zamedleniya k uglubleniyu. Rossiyskaya gazeta, Federalnyi vypusk [“EAEU: from slowdown to deepening]. Rossiyskaya Gazeta, Federal Edition, 73(7736). https://​rg​.ru/​ 2018/​12/​04/​karaganov​-integraciia​-v​-ramkah​-eaes​-prinosit​-politicheskie​-vygody​.html. Kryuchkova, E. (2021). EAES gotov k rostu i oborone. V Alma-Ate proshlo zasedaniye mezhpravsoveta stran “pyaterki” [“The EAEU is ready for growth and defence. A meeting of the intergovernmental council of the five member states was held in Alma-Ata”]. Kommersant, 21, 6 February. https://​www​ .kommersant​.ru/​doc/​4680874. LSE IDEAS (2019). Five Years after Maidan: Toward a Greater Eurasia? LSE IDEAS Report. Lukyanova, V. (2019). Rol’ resheniy Suda EAES v sovershenstvovanii tekhnicheskogo regulirovaniya Soyuza. Pyat’ let Dogovoru o Yevraziyskom ekonomicheskom soyuze: rol’ Suda. Mezhdunar. konf. (19–20 sentyabrya 2019 g.), sb. materialov. Sud Yevraziyskogo ekonomicheskogo soyuza [“The role of the decisions of the EAEU Court in improving the technical regulation of the Union. Five years of the Treaty on the Eurasian Economic Union: the role of the Court. Materials of the International conference (19–20 September 2019). The Court of the Eurasian Economic Union”], Minsk, p. 352. Mukhametdinov, M. (2020). The Eurasian Economic Union and Integration Theory. Cham: Palgrave Macmillan. Myasnikovich, M., & Kovalev, V. (2023). Novyye stranitsy integratsii v Yevraziyskom ekonomicheskom soyuze [“New pages of integration in the Eurasian Economic Union”]. Rossiya v globalnoy politike [Russia in Global Affairs], 10 January 2023. https://​globalaffairs​.ru/​articles/​novye​-straniczy​ -integraczii/​. Neshataeva, T. (2020). Eurasian integration: General values and legal institutions. Law and Globalization, 2(3), 62–85. Obydenkova, A. V., & Libman, A. (2019). Authoritarian Regionalism in the World of International Organizations: Global Perspective and the Eurasian Enigma. Oxford: Oxford University Press. Pugacheva, N. (2019). Pravovoye regulirovaniye trudovoy migratsii v ramkakh EAES: nekotoryye roblem pravoprimeneniya. Mezhdunar. Konf. (19–20 sentyabrya 2019 g.), sb. Materialov. Sud Yevraziyskogo ekonomicheskogo soyuza [“Legal regulation of labor migration within the EAEU: some problems of law enforcement. Materials of the International conference (19–20 September 2019). The Court of the Eurasian Economic Union”], Minsk, p. 388. Russo, A. (2018). Regions in Transition in the Former Soviet Area. London: Palgrave Macmillan. Slutsky, L., & Khudorenko, E. (2022). The EAEU amid global uncertainty: Integration dilemma revisited. Russia in Global Affairs, 20(2), 130–157. Staeger, U., & Bobocea, C. (2018). Bureaucratic authority and mimesis: The Eurasian Economic Union’s multiple integration logics. The International Spectator, 53(3), 38–54. Vasilyeva, N. A., & Lagutina, M. L. (2016). The Russian Project of Eurasian Integration: Geopolitical Prospects. Lanham, MD: Rowman & Littlefield. Vinokurov, E. (2018). Introduction to the Eurasian Economic Union. London: Palgrave Macmillan. Vinokurov, E., & Libman, A. (2012). Eurasian Integration: Challenges of Transcontinental Regionalism. Basingstoke: Palgrave Macmillan. Vinokurov, E., & Libman, A. (2014). Do economic crises impede or advance regional economic integration in the post-Soviet space? Post-Communist Economies, 26(3), 341–358. Vymyatnina, Y., & Antonova, D. (2014). Creating a Eurasian Union: Economic Integration of the Former Soviet Republics. Basingstoke: Palgrave Macmillan.

PART III EXTERNAL ENVIRONMENT

10. EAEU and the European Union Tom Casier

10.1 INTRODUCTION Things could have looked different for relations between the European Union (EU) and the Eurasian Economic Union (EAEU). Both organizations have considerable overlap when it comes to their legal and institutional design. Both were created with comparable liberal economic goals. Both represent to some degree complementary and interdependent economies. Moreover, when Putin presented the idea of a Eurasian Union, he presented it as ‘an effective “link” between Europe and the dynamic Asia-Pacific region’ (Putin, 2011). The reality looks quite different. There has been mutual suspicion from the outset and the relations between the EAEU and the EU are characterized by a non-dialogue. This chapter explores the reasons for this and reflects on the question whether things could have been different. To do so is not an evident task, as part of the literature is characterized by strongly opposed views. For this reason, the chapter first explores the main fault lines in the current literature on EU–EAEU relations. In the next section, it deals with the main similarities and differences between the two organizations, predominantly in terms of the EAEU’s legal and institutional design. This is followed by an analysis of the current state of affairs between both organizations. All this prepares the ground for the analysis of the deeper reasons behind the antagonisms between the EAEU and the EU and the intensified geopoliticization of their regional policies in the wake of the Ukraine crisis of 2014. Russia’s invasion of Ukraine in February 2022 put the geopolitical role of the EAEU in a new light and took the confrontation with the EU to a new level, dashing all hopes for closer cooperation. Some reflections on what the war means for EAEU–EU relations and on the future outlook are provided at the end of the chapter.

10.2

KEY THEMES AND VIEWS

While often mentioned in the context of the study of relations between the EU and Russia, there is a fairly limited amount of literature that deals specifically with the interaction between the EAEU and the EU. This is perhaps not surprising, given that there is basically no dialogue or collaboration between both organizations and that their relations stand in the shadow of the acrimonious relations today between Russia and the West. To get a bird’s eye view of the literature, it is important to be aware of some key fault lines. First, EAEU–EU relations have been studied from different disciplinary perspectives. From a legal perspective, the focus has been mainly on comparing the institutional and legal characteristics and practices of both organizations and the possibilities of legal integration (e.g., Karliuk, 2017; Pimenova, 2019; Petrov and Kalinichenko, 2016; Van der Loo and Van Elsuwege, 2012; Dragneva et al., 2017). From a (political) economic perspective, the emphasis has been on actual and potential economic effects, growth, trade divergence, etc., in some 138

EAEU and the European Union  139 cases comparing different scenarios or possible choices by countries to join one or the other trade arrangements (e.g., Vinokurov, 2014; Kofner and Erokhin, 2021). In the field of political science and international relations, we find a variety of approaches, often coloured by different theoretical angles. The most significant contribution comes from the field of regionalism, with authors focusing in particular on comparative regionalism and inter-regionalism (see in particular the work of Libman, Obydenkova, Dragneva and Wolczuk and various think tank studies). A second fault line is situated in time and is formed by the Ukraine crisis that erupted early in 2014. The roots of this crisis were exactly over the regional choice that Ukraine was going to make, either joining the then Eurasian Customs Union (EACU) or signing an Association Agreement with the EU. It is that choice, and the domestic turmoil it triggered, that led to a deep and ongoing crisis between Russia and the EU. Although the theme of tensions and colliding objectives is certainly not absent from literature pre-2014, the emphasis shifts drastically to explaining the clash and incompatibilities between both regional projects, with a strong ‘whodunnit’ emphasis (see, for example, Cadier, 2014). A third fault line relates to the polarization of the study field. As is also the case for a considerable number of the studies of Russia’s relations with the West, the literature is highly polarized, with some authors taking mainly critical stances vis-à-vis Russia, others vis-à-vis the EU (Nitoiu, 2017). This polarization is often outspoken where literature delves into the question of who is to blame for the tensions and lack of interaction. The polarization is more implicit where authors disagree whether the EAEU is a case of region-building, comparable to other cases in the world (Libman, 2020), or a fundamentally different case. In the latter case, authors often resort to different concepts or analytical categories to define Eurasian region-building as a special case. Stefanova, for example, describes the EU’s and Russia’s initiatives in their ‘contested neighbourhood’ as two varieties of regionalism: one neoliberal, the other geopolitical. Thereby she notes that EAEU regionalism ‘is a geopolitical concept not captured by the theoretical templates of the new regionalism of the last decade’ (Stefanova, 2018, p. 118). This idea of ‘competing regionalisms’ (Stefanova, 2018, p. 145) is widespread in the literature, though Stefanova also recognizes this competition has altered the rationale of EU’s regionalism from an open to exclusive, geopolitical project. Moreover, it should be noted that recognizing the EAEU as part of Russia’s geostrategic agenda does not per definition coincide with blaming Russia for the current confrontation. Moscow’s approach can also be seen as a defensive act, initially seeking to restore imbalances in relations with the EU (DeBardeleben, 2018) or a reaction to the EU’s expansion: ‘the EAEU is not only an answer to the perceived geopolitical expansion of the EU, but also aimed at balancing China’s increasing influence in Central Asia and avoiding to get squeezed in’ (Gast, 2021, p. 188). Another highly polarized, related theme is whether the EAEU is about Russia’s dominance of the organization and whether it uses the Union as an instrument to enhance its power and domination, as an instrument serving Russia’s strategic interest (e.g., Dragneva, 2018; Dragneva and Wolczuk, 2015, 2017; Haukkala, 2013). Part of the discussion focuses on the extent to which Russia has to compromise and the extent to which it effectively benefits from Eurasian regional integration. Libman makes a distinction between the imagined and real EAEU: ‘The “imagined EAEU” is discussed primarily from the point of view of organization’s ability to empower Russia in global politics. The “real EAEU”, actually, seems to be a factor constraining Russian economic policy rather than serving as a tool for Russian power’ (Libman, 2017, p. 97).

140  The Elgar companion to the Eurasian Economic Union Finally, part of the literature focuses on the EAEU as an organization of authoritarian (or hybrid) states versus the EU as an organization of democratic states with a normative policy of democracy promotion. Part of the literature has focused on the EAEU as an example of ‘authoritarian regionalism’ (see Libman and Obydenkova, 2018; Gast, 2021). Gast (2021) sees the organization as an instrument for regime survival. In a more nuanced way, Libman and Obydenkova (2018) suggest ‘that the EAEU is on occasion significant in the stabilization of authoritarian regimes – not because of its policies and institutions, but because Russia, as its leading member, perceives the EAEU membership of certain countries to be important for its global and regional power status’ (p. 1058). Only a few studies, however, engage in a more systematic study of the ideational grounds of Eurasian regionalism, as compared to that of the EU (see in particular Izotov and Obydenkova, 2021). Several of these themes will be dealt with more extensively below. Before doing so, it should be noted that most of the literature on EAEU–EU interaction focuses on the role the EU, the EAEU and Russia. Fewer studies systematically study the role and position of current EAEU member states. A good example of a study that does so, is Konopelko’s study of how Kazakhstan’s membership affects relations between the EU and the country (Konopelko, 2018). Against this background, Delcour is certainly right to point to the importance of the agency of target states in region-building (Delcour, 2015), a factor that is often overlooked.

10.3

THE EAEU: MODELLED AFTER THE EU, BUT HOW SIMILAR?

Links between the EAEU and the EU are obvious from the way the former was conceived. Several authors have argued the EAEU was modelled – in an adapted version – after the EU (see, for example, Van der Loo and Van Elsuwege, 2012). Also Putin himself, in his 2011 article in Izvestiya, suggests Eurasian integration ‘takes into consideration the experience of the EU’, learning from its strengths and weaknesses (Putin, 2011). This section first looks at similarities and differences in the legal and institutional design of both organizations. It then continues with some general observations comparing the politics in both unions and finally the scope of their policies. Similarities are clearly visible in the institutional design of the EAEU and legal terminology.1 The names of EAEU institutions (Supreme Council, Commission, Court) resonate with those of the EU, but there are clear and significant differences. The Supreme Eurasian Economic Council, composed of Heads of State, displays similarities to the European Council, determining strategy and direction of the organization. The Eurasian Economic Commission is the EAEU’s governing body. Its role overlaps with that of the European Commission, but through its composition (in particular that of the Commission Council, composed of representatives from member states and voting by unanimity), it is more political.2 In contrast to the European Commission, independently representing the European interest, the Eurasian Economic Commission has to ensure the respect of national interests of the member states (Karliuk, 2017, p. 57), which erodes its supranational character. ‘Any decision taken by See Chapter 9 of this Companion. The EAEC Board displays a stronger similarity to the European Commission, being composed of heads of functional departments. 1 2

EAEU and the European Union  141 the [Eurasian Economic Commission] can be contested by a disagreeing member state and revoked by the higher bodies of the EAEU’ (Dragneva, 2021, p. 241). Another crucial difference relates to the absence of a parliament in the EAEU, contrasting with the crucial role of the directly elected European Parliament as co-decider. Finally, the EAEU Court ensures ‘the uniform application of the Treaty by the member states and institutions of the Union’ (Karliuk, 2017, p. 56), in a similar way as the Court of Justice of the EU. Yet, in general, the legal autonomy is less developed than that of the EU, as the direct effect and binding nature of decisions can more easily be challenged in the EAEU. Karliuk concludes: ‘Even though it is possible to identify broad correspondences between EAEU and EU institutions, the EAEU decision-making process is unquestionably different from that of the EU. EU decision-making is based primarily on a legislative process involving several institutions, where the European Commission has executive functions and the virtually exclusive power to make proposals’ (2017, p. 59). Therefore, it may be more correct to state that the EAEU, in its legal and institutional set-up, has been inspired by the EU, but it has been adapted and reflects a less autonomous legal order and a less supranational, less participative institutional structure, whereby ‘the member states remain in control of the decision-making process, backed by what is essentially a veto power’ (Karliuk, 2017, p. 59). As Pimenova states: ‘Legislative acts passed in the EAEU are not given an absolute priority over acts of national legislation of its members, which results in a lack of consistency and unity on this issue among members’ (Pimenova, 2019, p. 88). This brings us to the politics of the EAEU. While the EU is a union of 27 member states of varying sizes and with complex checks and balances, the EAEU is a highly asymmetrical organization (Libman and Obydenkova, 2018) characterized by ‘monocentricity’ (Slutsky and Khudorenko, 2022, p. 136). In 2020 Russia accounted for around 85% of the union’s nominal GDP, 81% of its merchandise exports and around 79.5% of its population.3 Only a small percentage of around 7–8% of its trade is with the other EAEU member states (Vinokurov, 2017, p. 62), far below what Russia exports to the EU. Also when it comes to technical expertise, Russia has a clear overweight (Dragneva, 2021, p. 242). Because of this imbalance, several authors have argued that the organization tends to reflect Russian interests more strongly (e.g., Dragneva and Hartwell, 2021). Libman and Obydenkova emphasize that we should not conclude from this ‘that Russia unambiguously and indisputably dominates the EAEU’ (2018, p. 1044). It may compromise and accept decisions or court rulings that go against its interests (Libman, 2017). Yet, as an instrument of redistribution in an asymmetrical context, the EAEU fosters loyalty to Russia (Libman and Obydenkova, 2018, p. 1045). Arguably, the economic organization also allows Moscow to play the role of a ‘regional gatekeeper for Eurasia’ (Dragneva and Wolczuk, 2017, p. 7). Member states have to ‘pass by Moscow’ for important economic decisions.4 Finally, how do the EAEU and the EU compare in terms of their policies and integration goals? On paper, both integration projects are based on similar liberal economic norms. Those also feature strongly in Putin’s article on Eurasian Union (Putin, 2011). Both organizations aim to create a common market, but while the EAEU is limited to economic integration, the EU has moved well beyond that (Karliuk, 2017, p. 53). The EU’s scope goes well into other policy areas. It has, for example, an established environmental and climate policy. With the 3 4



Based on data of the IMF and the World Bank for 2020 (own calculations). See Chapter 15 of this Companion.

142  The Elgar companion to the Eurasian Economic Union Eurozone, it has its own currency and monetary policy. And it has its own foreign and security policy. In the case of the EAEU, a political integration dimension was excluded by Russia’s partners. To date, the EAEU functions mainly as a customs union and only to a limited extent as a single market. Important obstacles remain in the way for the creation of a common market of goods and services, but it has made significant progress in the creation of a common labour market (Vinokurov, 2017). The organization is a long haul away from a coordination of macro-economic policies, let alone monetary policies. Self-evidently it would be unfair to compare the progress made in the EAEU’s recent history to that in seven decades of European integration, but profound differences as to the scope of policies and the extent of integration should be noted. When it comes to its normative basis, the EAEU is not an organization of democratic states, as the EU is. Nor does it have a strong alternative ideational basis, though attempts were made to create a Eurasian ideational basis for legitimizing the integration process, as a mirror image of the integrative idea behind Europeanization in the EU (Izotov and Obydenkova, 2021).

10.4

THE STATE OF EAEU–EU RELATIONS UNTIL FEBRUARY 2022

The predecessor of the EAEU, the Eurasian Customs Union (EACU), was established in 2010. This was one year after the EU had launched the Eastern Partnership (EaP), the revised eastern dimension of its European Neighbourhood Policy. From the very beginning, both initiatives were received negatively by their counterpart. Lavrov called the EaP ‘a clear attempt by the EU to build a sphere of influence’ (EU Observer, 2009). In the EU, many politicians echoed the idea, expressed by US Secretary of State Hillary Clinton that Russia-led Eurasian integration was ‘a move to re-Sovietize the region’ (RFE/RL, 2012). From the beginning, both initiatives were mutually seen as rivalling initiatives, hiding ambitions of influence and dominance. This is remarkable for several reasons. First, the EU is traditionally a supporter of regional integration projects, rather than opposed to them. Second, both the EU and the EAEU are primarily economic organizations. As such, the treaties under which they were established do not suggest geopolitical ambitions, implying that this suspicion is to a large degree related to the perception – right or wrong – one has of the intentions of the other to achieve geopolitical goals through their regional organization. Third, as noted in the previous section, there exist important similarities between both organizations, that could be expected to facilitate a dialogue. Despite this seemingly solid ground for collaboration, the relations between the EU and the EAEU have largely been a non-dialogue, though there have been contacts at technical level. The EU refused, from the beginning, to enter into a formal high-level dialogue with the EACU. At the EU–Russia summit of June 2012, Russia was hoping to get symbolic recognition for its leadership of the regional bloc and insisted that the EU should discuss trade matters directly with the EACU. Brussels refused to start direct negotiations. There were practical reasons for this. The EU wished to avoid talking directly with President Lukashenko, as it had imposed sanctions on Belarus. Likely, there was also a reluctance on the EU’s side to give recognition to a trade bloc, dominated by Russia, and seen by many Western politicians as a pretext for reinforcing Moscow’s influence over the post-Soviet space. This reluctance was read by the Kremlin as a refusal by the EU to recognize Russia as regional leader and great

EAEU and the European Union  143 power. As will be developed in the next section, this was reinforced by the de facto competition between the EU and Russia over luring ‘the countries in between’ into their respective regional cooperation initiatives. Russia attempted again to establish EAEU–EU cooperation in 2015 (Potemkina, 2018, p. 7), in an atmosphere whereby some hoped that pragmatic interregional cooperation could be a way out of the tense stalemate between Moscow and Brussels. Responding to these initiatives and in a demarche criticized by some member states, European Commission President Juncker sent a letter to Putin, in which he stated that he had asked the Commission to explore options to bring the EAEU and EU closer together. Yet, he linked the possibility of cooperation to the implementation of the Minsk agreement and the improvement of the wider political context, an option rejected by the Kremlin (Gotev, 2015). Also Kazakh President Nazarbayev took initiatives for interregional cooperation and there were meetings between individual EU member states and the EAEU. In June 2019, a meeting took place in Moscow between top officials of both organizations, dealing with technical aspects in areas like trade and customs regulation (Kofner, 2019). Yet, these sparse technical contacts were far from a high-level political meeting and recognition between the two Unions.

10.5

EXPLAINING EAEU–EU ANTAGONISMS

The broader context for understanding the antagonisms between the EU and the EAEU is that of two regional policies, one by the EU, one by Russia, targeting the same post-Soviet states. Because of the incompatibility of both projects, those countries ended up in a position whereby they had to make an either-or choice between both forms of regional cooperation. The EU developed its European Neighbourhood Policy (ENP) on the eve of the big eastern enlargement of 2004, in order to develop privileged relations with the neighbours of the extended Union, to create stability on its borders and to promote the selective transfer of its rules and norms. This happened primarily with a positive intention to avoid new dividing lines in Europe. At the time of the launching, the policy was not considered to be problematic. The concrete ambitions of the ENP were limited and the transformative process envisaged was slow. In the post-Soviet area, integration was rather weak and happening under the broad umbrella of the Commonwealth of Independent States (CIS). As Libman and Vinokurov (2012) pointed out, it was a form of ‘holding together integration’, rather than ‘coming together integration’. This situation changed in two substantial ways. First, Russia changed the course of its regional integration policy. Instead of seeking to unite all CIS members, Moscow opted for deeper integration – in the form of a customs union – with those countries willing to collaborate closely with Russia (initially Belarus and Kazakhstan, later also Armenia and Kyrgyzstan). This led to the establishment of the EACU in 2010. Second, the EU recognized the regional dimensions of its rather schizophrenic ENP. The Eastern Partnership, launched in 2009, aimed at closer ‘political association’ and ‘further economic integration’ of the eastern neighbours of the EU (Council of the EU, 2009). At the same time the policy got a stronger security and strategic dimension. The EU aimed at the signing of a new generation of Association Agreements, providing for a Deep and Comprehensive Free Trade Area, the approximation of rules and foreign policy alignment (agreements that were eventually signed in 2014 with Moldova, Georgia and Ukraine).

144  The Elgar companion to the Eurasian Economic Union While there had been tensions and suspicions before, both integration processes at this point collided. While the EU was seeking to lure former Soviet states in the EaP to sign an association and free trade agreement, Russia pressured them to join the EACU. For the countries concerned, it was impossible to do both. It was a legal incompatibility that forced the ‘countries in between’ to choose between two forms of integration. As the EACU is primarily a customs union, it implies a common external tariff for all members. The latter excludes the possibility of a separate bilateral free trade agreement of one of its members with the EU, which would imply abolishing tariffs altogether. To put this differently, a member state could not agree with a common tariff on the import of say cars from the EU within a customs union, while at the same time agreeing with the EU to abolish all import tariffs on cars. This forced countries like Ukraine to make unwanted choices – unwanted, in the sense that their trade interests required close association with both Russia and the EU. While this incompatibility as such is a legal and accidental incompatibility of two independent integration processes,5 the choice of the countries in between was seen – in particular by Moscow – as a strategic choice to join either the Western or the Russian ‘camp’. The reading of these events therefore became highly geopolitical and became immersed in zero-sum thinking. That things could go wrong with two opposite integration processes, in the absence of trilateral talks or an overarching common economic space from Lisbon to Vladivostok, was written in the stars. Multiple authors warned long before the Ukraine crisis about the possibility of a ‘clash of integration projects’ (Casier, 2007). Charap and Troitskiy (2013) spoke of an ‘integration dilemma’, whereby well-intended integration initiatives are seen by the other side as a threat to its security and thus get a zero-sum dimension (Charap and Troitskiy, 2013, p. 50). With states ‘making worst-case assumptions about the motives of other states’, this easily results in an ‘escalatory spiral’ (Charap and Troitskiy, 2013, pp. 51, 60). This is what eventually happened and got out of control in the case of Ukraine at the end of 2013 and in early 2014, where a wavering president, Yanukovych, backtracked on the plan to sign an Association Agreement with the EU, but by doing so triggered the Euromaidan protests that would eventually lead to his ousting. In an unlikely and unpredictable sequence of events, the ‘clash of integration processes’ thus resulted in the Ukraine crisis, with violent protests and repression, regime change, the annexation of Crimea, war in Eastern Ukraine and a deep and protracted confrontation between the EU and Russia. The antagonism between the Russia-led Eurasian integration process and the EU-led Eastern Partnership initiatives should thus be understood in the context of both structural factors and the broader dynamics of an ‘escalatory logic’. Related to the former, DeBardeleben speaks of a fundamental paradigm shift in relations between the EU and Russia. Initially, the EU–Russia Strategic Partnership developed within a paradigm of a ‘common/greater Europe’: ‘the relationship revolved around contested visions of a common integrated [greater European] space, but with agreement on some fundamental principles’ (DeBardeleben, 2018, p. 115). In absence of a ‘shared vision of how the relationship should unfold within the larger European space’, this paradigm was replaced by a new paradigm of ‘competing regionalisms’ (p. 115), characterized by mutually exclusive integration projects, competing regulatory norms and a securitization of the relationship (p. 129). The antagonisms between the EAEU and EU In a little convincing statement, European Commissioner Füle suggested that Russia carried the main responsibility for the incompatibility of both projects because it created the Eurasian Customs Union after the launching of the Eastern Partnership (Füle, 2013). 5

EAEU and the European Union  145 need to be seen in this context of fundamentally different visions on integration in the wider European space, combined with a logic of competition and escalating mistrust. Does this mean that the competing regional projects are per definition geopolitical? As indicated in the literature review, experts diverge strongly in their answers to this question. A considerable part of the literature puts the ball firmly in Russia’s court. Some of them accuse Russia of having established the EAEU as an instrument of influence and control (e.g., Dragneva, 2018) or consider the organization to be fully dominated by Russia (see Libman, 2017 for a critical analysis). Others blame the EU for pursuing a policy without much regard for Russia’s interests and sensitivities about its ‘privileged interests’ in the post-Soviet space. A more nuanced answer, away from highly abstracted images of geopolitics, does provide more interesting insights. Any form of integration serves both economic and political objectives. This was equally the case for European integration, which took off with the integration of the strategic coal and steel sectors with the clear political purpose of creating structural peace and stability in (Western) Europe. In the same way, the EAEU certainly served clear economic and commercial goals; seeking to reinforce often weak national economies and reinforcing the regional and global economic position of the member states through integration. Politically, Putin’s proposal for a Eurasian Union can be seen primarily as an attempt to redress the balance between the EU and Russia (DeBardeleben, 2018). Equality was at the heart of the EU–Russia Strategic Partnership, but was often largely symbolic. Russia found itself bargaining with a highly integrated economic bloc that in terms of its economic size outnumbered Russia’s GDP many times. If Russia were able to speak through and on behalf of a Eurasian Union, this would restore the balance somewhat and would increase Russia’s regional influence. It may explain well why Russia shifted from an all-encompassing, CIS-based regional policy to one based on deeper integration with willing partners. This way of thinking is certainly geopolitical, but in a much milder way than the zero-sum geopolitical thinking, based on mistrust, that would come to characterize Russia’s policy at a later stage. It should be noted here that the original concept of a Eurasian Union goes back to 1994 and Kazakh President Nazarbayev (Izotov and Obydenkova, 2021, p. 156). His ‘doctrine of Eurasianism’ was largely pragmatic and envisaged an economic union (Konopelko, 2018, p. 4). He remained a consistent supporter of the establishment of a customs union with Russia and Belarus (Konopelko, 2018, p. 5), while at the same time aiming to strengthen Kazakhstan’s sovereignty and independence (Konopelko, 2018, p. 13). Public opinion support for Eurasian integration decreased in EAEU member states after the Russian annexation of Crimea and ‘the Ukrainian crisis damaged the reputation of the EAEU from its start’ (Izotov and Obydenkova, 2021, p. 157). This was not limited to concerns over the annexation of Crimea, both in Belarus and Kazakhstan, blocking the possibility of developing Eurasian integration into a political union. As Troitskiy (2020) puts it: ‘The crisis over Ukraine became the E[A]EU’s birth trauma.’ Russia’s counter-sanctions against the West and the ending of free trade with Ukraine led to tensions with Kazakhstan and Belarus. ‘Russia’s foreign policy turn of 2014 and the change in its international standing undermined the E[A]EU’s fundamental principle of free trade. With Moscow’s new “selective” implementation of the union’s basic principles, its normative framework became much more difficult to sustain. As tensions with the United States and the EU mounted, Russia moved to “securitize” the E[A]EU, increasingly seeing it as primarily a zone of political influence’ (Troitskiy, 2020). In other words, we could argue that we see a radicalization of Moscow’s geopolitical approach with the eruption of the Ukraine crisis in 2014. Russia’s understanding

146  The Elgar companion to the Eurasian Economic Union of international relations as existential threats became ‘the main source of misunderstanding in Russia’s relations with the other former Soviet republics’ (Sushentsov and Silaev quoted in Slutsky and Khudorenko, 2022, p. 144). How about the EU? There are many reasons to assume that the launch of the ENP/EaP was not primarily driven by a geopolitical masterplan. Cadier states: ‘While geopolitical considerations were not totally absent in the context and sources at the origins of the EaP, the actual policy outcome can hardly be described as a “geopolitical instrument” in the sense of the traditional tool of power politics’ (Cadier, 2014, p. 78). He adds: ‘The EU’s transformative power is potent but incremental, composite, largely unspecific and, thereby, difficult to direct and use instrumentally’ (p. 79). While the EU may not have been driven by major geopolitical ambitions, the policy of associating former Soviet states was doomed to have political effects. Changes in trade and investment flows do not come without changes in patterns of influence. Foreign policy alignment of associated countries (even if only a vague principle) implies new allegiances. It may be argued that the EU has underestimated the geopolitical impact of its policy. This is even more the case considering that Russia saw the post-Soviet space as an area of vital and ‘privileged interests’ and Ukraine as a country of existential importance. Moreover, also in the case of the EU, we see an evolution of its policy. As mentioned above, the EaP reinforced the strategic dimension of the EU’s eastern ENP. Yet, the real strengthening of the geopolitical dimension also came with the Ukraine crisis. In 2015 the EU reviewed its ENP, giving stability and security a much more central place. According to Richard Youngs, the EU’s policy towards the East became a mixture of geostrategic thinking and instrumental use of liberal-cooperative practices (Youngs, 2017, p. 220). In sum, that the incompatibilities and rivalries between the two regional projects turned geopolitical was to a considerable degree a ‘self-fulfilling prophecy’ (Cadier, 2014, p. 82). It was a logic of competition and escalation that made Russia and the EU stumble into a more radical geopoliticization of their integration policies.

10.6

ASSESSING THE INTERACTION AND FUTURE OUTLOOK

After relations between Russia and the EU derailed over the Ukraine crisis, some have suggested that a way of mending relations could come from direct engagement between the EU and EAEU. A free trade agreement between both organizations could solve the compatibility problem mentioned above and thus contribute to a solution of the Ukraine crisis. This idea was defended by several experts, but also found support in some EU member states, in particular Germany (Dragneva et al., 2017; see also Meister, 2015).6 Vinokurov pledged a ‘mega-deal’, based on deep economic integration, with mutual concessions and trade-offs across various sectors and issues, though he admitted that this is only feasible under different political circumstances (Vinokurov, 2014). Many authors recognized that a deal between the two Unions would make economic sense (Vinokurov, 2014; Kofner, 2019; Dragneva, 2018). There was a considerable degree of interdependence between both blocs and strategic compatibility of production factors (Kofner, Also in a joint statement, accompanying the Minsk II agreement in 2015, the leaders of France, Germany, Russia and Ukraine confirmed their commitment to the Common Economic Space from the Atlantic to the Pacific. 6

EAEU and the European Union  147 2019). Both organizations shared fundamental normative principles in the economic sector. A trade deal was expected to lead to a substantial increase of trade volumes. Yet, the process of finding trade-offs would likely have been long and difficult. While the EU mainly had an interest in free trade and a better and legally more certain investment climate, EAEU states would not have benefited from a free trade area, but would have preferred to see an increase of FDI and technology transfer to help them to modernize their economies and make them more competitive (Kofner, 2017, 2019). Dragneva et al. (2017), however, argued that there are issues of incompatibility that stood in the way of closer cooperation. Thereby, they understood incompatibility both in a legal and non-legal way, the latter referring to the political practices surrounding Eurasian integration. They mentioned inter alia the EU’s recognition of the sovereign right of states to choose, while Russia acts on the basis of the principle of limited sovereignty. Further, they argued that the EU saw costs and benefits in terms of trade liberalization, while Russia saw them in terms of patronage and security. As a result, ‘the EU’s focus on technocratic solutions during the negotiation process was doomed to fail’ (Dragneva et al., 2017, p. 9). Analysing the founding treaty of the EAEU, the Astana Treaty signed in 2014, they see a range of incompatibilities that stand in the way of closer engagement: the ambitious objectives of the EAEU are not translated in a clear division of competences between the Union and the member states; the delegation of powers to the Union can easily be reversed by the member states; the EAEU is an incomplete project and even partial Customs Union; the member states continue to play an important role in negotiations with third parties, while Russia plays the role of gatekeeper. On this basis, they conclude that the bargaining process between the EAEU’s member states is characterized by ‘a hub-and-spoke pattern of bilateral dealings with Russia as the hub’ (Dragneva et al., 2017, p. 11). From her side, Potemkina stated that it was the EU’s conditionality approach that stood in the way of constructive cooperation (Potemkina, 2018, p. 7). She also referred to a lack of understanding of the EAEU in Brussels and a biased perception that Eurasian integration develops due to Russian support. She argued that in this regard, the EU was ignoring ‘an objective reality’ (p. 8). Finding an economic deal between two organizations with fundamentally different economies and preferences would certainly not have been an easy ride. It is more than the simple sum of common benefits and finding balanced trade-offs where the interests diverge. Anyway, a substantial reconciliation between both blocs was unlikely to happen without a decrease in the tensions and a restoration of trust between Moscow and Brussels. As long as a deal with the EAEU was seen in the EU as legitimizing the Putin regime (Libman and Obydenkova, 2021, p. 367), there was little chance of progress. All chances of a deal between the EU and the EAEU were finally shattered with Russia’s invasion of Ukraine on 24 February 2022. The war triggered ten EU sanctions packages against Russia (as of mid-April 2023), imposing far-reaching restrictive trade measures, at a level unseen before. Brussels also targeted Belarus with sanctions, implying two out of the EAEU’s five member states were hit. The war took away any doubt that Russia was willing to use the EAEU for geopolitical reasons. Under the sanctions, Russia showed no restraint in placing the protection of its own economy above respect for the EAEU rules (Wolczuk and Dragneva, 2022). These measures, targeting Russia and Belarus, have important implications. First, the sanctions have a major impact on other EAEU members in various ways: changing trade patterns within the Union, repercussions of a fluctuating rouble or the reduction of remittances

148  The Elgar companion to the Eurasian Economic Union of citizens of poorer EAEU states working in Russia. Also trade flows between the EU and EAEU states will be affected, but not necessarily in a linear way. Yet, at the time of writing, it is still far too early for conclusions. Not only is Russia’s war against Ukraine far from over, but new trade patterns still have to crystallize. Moreover, in the current context of heavy economic restrictive measures against two EAEU members, the three remaining members are in theory well-positioned to offer loopholes to circumvent sanctions against Russia and Belarus. To avoid circumvention, the EU advised exporters and importers to take ‘due diligence measures’, with particular reference to the EAEU states (European Commission, 2022). While the effectiveness of those is uncertain, some analysts point out that the remaining EAEU states do not have the capacity to make up for the economic costs incurred by Russia because of the sanctions (Hess, 2022). The case of Kazakhstan, the EAEU’s second largest economy, is interesting in this respect. The country refused to endorse Russia’s war in Ukraine and abstained in the UN General Assembly vote deploring Russian aggression against Ukraine. At an early stage of the war, Timur Suleimenov, the first deputy chief of staff to the Kazakh president, was sent to Brussels to reassure the EU that Kazakhstan had no intention to act as a gateway for the import and export of sanctioned goods from and to Russia (Gotev, 2022).7 Western sanctions and shifting trade patterns change relations within the EAEU and between individual members and the EU. Within the EAEU a substantial difference in economic growth data emerged between on one hand Russia and Belarus, that were targeted by unprecedented sanctions, and the three other members of the EAEU. According to data of the Eurasian Development Bank, the Russian GDP shrank in the first nine months of 2022 by 1.8% and that of Belarus by 4.7%. The GDP of Kazakhstan, Kyrgyzstan and Armenia, however, grew by 2.8%, 7.2% and 14.1% respectively (Eurasian Development Bank, 2022). Provisional trade figures for 2022 offer some interesting indications of changing trade patterns, in particular a sharp increase in trade between EAEU members like Kazakhstan and the EU. Between the third quarter of 2021 and the third quarter of 2022, exports from the EU to Kazakhstan almost doubled from 1,562 to 3,042 million USD (IMF, 2023). The pattern for Armenia was similar with exports rising from 223 to 594 million USD. In the case of Kazakhstan these volumes are much higher than the increase of Kazakhstan’s export to Russia over the same time (from 1,662 to 1,818 million USD), suggesting the increase in trade cannot simply be explained by the rerouting of exports to Russia via Kazakhstan. Besides, also EU imports from Kazakhstan and Armenia rose considerably, albeit not to the same extent as exports (IMF, 2023). In combination with the sharp fall of EU–Russia trade, this may indicate a trend whereby the trade relations between the EU and the EAEU as a whole will be at a historical low, while they grow considerably with individual, non-sanctioned EAEU members. This boosts the importance of the EU for the latter. Already before Russia’s invasion of February 2022, the EU was a key trading partner for two of the latter. For Kazakhstan, the EU was the first trading partner, representing 29.4% of its trade in goods in 2021. For Armenia, the EU is its second trading partner, representing 18.9% of its trade in goods in 2021 (European Commission DG Trade, 2022).8 The interesting scenarios for the future then relate to how changing trade patterns translate into political relations between the EU and individual EAEU members Kazakhstan, Kyrgyzstan

7 8

See also Chapter 16 of this Companion. For Kyrgyzstan, the EU ranks only sixth (European Commission DG Trade, 2022).

EAEU and the European Union  149 and Armenia. The latter have been irritated both by the lack of an EAEU-consolidated economic response to the sanctions and by the attempts to politicize economic integration (Slutsky and Khudorenko, 2022, p. 150). Changing trade relations could affect the asymmetrical balance of power in the EAEU to some degree. Shifting national economic interests may reinforce the ‘multi-vector policy’ of EAEU member states (Slutsky and Khudorenko, 2022, p. 132), not only in relations with the EU, but also in relations with China. Some signs of this reinforcement of links with the EU seem to be present in the case of Kazakhstan. The increase in trade flows was accompanied by increased diplomatic interaction in 2022. European Council President Charles Michel visited Astana on 26–27 October 2022. High Representative Josep Borrell visited Astana on 17 November 2022. The importance of the region for the EU is also reflected in the new Strategy for Central Asia that the EU presented in 2019. This strategy is more assertive (Winn and Gänzle, 2022) and provides a larger budget than the previous 2007 strategy. It is a strategy developed in line with the EU’s principled pragmatism and resilience. By presenting itself as an ‘“honest broker” in the region predicated on pragmatism’, ‘the EU embraces geoeconomic and geopolitical competition in the region’, albeit as a second-order actor (Winn and Gänzle, 2022, pp. 6, 15). The other way around, there are equally indicators of Kazakhstan seeking to weaken its links to Russia. The closure of its trade mission in Moscow, announced early February 2023, is a good case in point (Gotev, 2023). In the case of Armenia, the relations with Russia have deteriorated on several fronts, with Yerevan in particular expressing its concerns over the lack of security protection it receives from Russia in its conflict with Azerbaijan. It will also be interesting to see to what extent Kazakhstan seeks to open alternative trade routes and opportunities, not least with China. The war in Ukraine will no doubt be a test for the coherence of the EAEU and for Moscow’s ability to use the organization for geopolitical purposes. It will indicate to what extent its member states have their fate tied to Russia. With EU–EAEU approximation entirely excluded in current circumstances, future scenarios could be determined mainly by increasing tensions between non-sanctioned EAEU member states seeking to go their own political and economic way, versus attempts by Moscow to reinforce the geopolitical use of the EAEU for instrumental reasons. Whether the EAEU will survive under these circumstances and in which form will depend on many factors, but any reinforcement in relations with the EU in the years to come is out of the question.

10.7 CONCLUSION Despite considerable legal and institutional similarities between both organizations, the EAEU and EU took off on the wrong foot. This is neither simply the result of the way the organizations were conceived, nor of their aspirations. It is primarily the result of the broader political context of rising antagonisms and eventually a confrontation between the EU and Russia, that has overshadowed their potential relations from the beginning. From the outset, there have been mutual suspicions between both organizations and, despite important correspondences, the two unions never entered into a high-level dialogue based on mutual recognition. On the EU’s side, there were from the beginning suspicions about Russia’s dominance in an asymmetrical EAEU. On the Russian side, there were suspicions about how the EU’s Eastern Partnership initiative was threatening its interests in the former Soviet space. To understand how relations derailed, one needs to understand both the struc-

150  The Elgar companion to the Eurasian Economic Union tural factors – a paradigm of ‘competing regionalisms’ and Putin seeking to create a new pole in global relations – and the dynamics of the process, an ‘escalatory logic’ and intensified geopoliticization of region-building, fostered by the crisis over Ukraine. Russia’s invasion of Ukraine in 2022 took this problem to a new level. It further increased the use of the EAEU as a geopolitical instrument in a context of dramatic escalation. The EU imposed far-reaching sanctions on both Russia and Belarus. This increases the importance of direct economic relations between the EU and the remaining EAEU member states, who are eager to safeguard trade with the EU and send signals to the EU that they do not wish to be seen as a loophole for the circumvention of sanctions. In a scenario of a long war and lasting sanctions, there is self-evidently no prospect of a possible political dialogue between the EU and the EAEU, which would be a prerequisite for a trade agreement. Yet, despite the absence of any prospect at the inter-institutional level, we could witness a hidden transformation at the level of bilateral trade between the EU and the non-sanctioned EAEU member states. This will likely go hand in hand with tensions within the EAEU between Russia, that wants to use the organization for its geopolitical objectives, and member states that seek to amend asymmetrical power relations within the union.

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11. EAEU and Belt and Road Initiative Marcin Kaczmarski

11.1 INTRODUCTION The relationship between the Eurasian Economic Union (EAEU) and the Chinese Belt and Road Initiative (BRI) is of dual nature: (i) between a regional economic integration organization and a great power, i.e. the EAEU, represented by the Eurasian Economic Commission, and China, and (ii) between two great powers, i.e. Russia and China. Given Russia’s role in the EAEU, it is the Russian–Chinese relationship that defines the extent of cooperation between the EAEU and China, despite the formal and international-legal position of the EAEU. Moreover, unlike the EAEU with its set of institutions and clear formal competences, the BRI remains an instrument in the hands of the Chinese government. Whereas particular states are invited to join the BRI, this policy framework has been neither multilateralized nor institutionalized. As a result, the discussion about the effects of the BRI on Eurasian integration needs to account for the triangular relations among Russia, China and the EAEU. The EAEU has been linked to the BRI since both initiatives’ early days. External observers interpreted both initiatives as mutual competitors. They regarded the Russia-led EAEU as a way to prevent not only Western but also Chinese encroachments into the space where Russia sought primacy. The same logic was applied to China’s BRI, which was interpreted as a way to bypass and circumvent barriers that Moscow tried to erect with the help of a regional integration project. The malleable nature of the BRI makes the assessment of its ties to the EAEU even more difficult. While the BRI is global in its scope, the area of the EAEU is relevant for one of the BRI’s major components, the Silk Road Economic Belt (SREB), the initiative announced by Xi Jinping during his visit to Kazakhstan in late 2013. Whereas the main focus of the Chinese initiative was on transport links and infrastructure construction, assessing what initiatives and projects the BRI has actually encompassed remains a problematic task, too. The Chinese official discourse tended to prop up the BRI from the very beginning, subscribing every aspect of China’s cooperation with particular states under the aegis of the BRI. As a result, a number of projects implemented by China with its Central Asian partners on a purely bilateral basis and often initiated well before 2013 have been presented as constituting a part of the BRI. The BRI can thus encompass both bilateral cooperation and multilateral collaboration, for instance, in the form of transit corridors linking China and the European Union. It is those corridors that captured global imagination, with unofficial maps showing linkages between China and the EU going through Central Asia and the Middle East, often bypassing Russia. A further complication to Sino-Russian inter-regional ties was added by Russia’s concept of the Greater Eurasian Partnership (Greater Eurasia). This initiative has aimed at subsuming the EAEU as its core component while presenting a peer initiative to China’s BRI (Shakhanova and Garlick, 2020). Yet another difficulty lies in distinguishing between Sino-Russian regional relations and cooperation between the two initiatives (Paikin, 2021). This chapter takes all 153

154  The Elgar companion to the Eurasian Economic Union these features of the BRI into consideration when exploring the EAEU’s relations with the Chinese initiative. The mainstream policy-oriented debate interpreted the emergence of the BRI against the backdrop of the Eurasian Economic Union in terms of the return of power politics and spheres of influence. Regional projects pursued by authoritarian states were one of the many symptoms of the waning liberal international order. Some scholars contended that regional projects were parts of rational strategies, aimed at increasing political and economic control over neighbours: ‘Regionally, most major powers still attempt to build their own spheres of influence but instead of conquering territory, they often attempt to bind these regions to themselves economically’ (Scholvin and Wigell, 2019, p. 2; Libman and Obydenkova, 2018). Key milestones of the EAEU–BRI relationship included: the mentioning of both initiatives in a joint communication signed by Russian and Chinese leaders at the Shanghai summit in May 2014; the joint declaration on coordinating the development of the two initiatives adopted at the 2015 summit in Moscow; the agreement on trade and economic cooperation between the EAEU and China in May 2018; and the establishment of the joint commission on the implementation of the agreement. Two key features of the EAEU–BRI relationship stand out. First, Russia and China have avoided direct and open competition between their regional initiatives, a development running contrary to expectations of many external observers.1 Second, the slow pace of implementation of plans to synchronize the development of the two initiatives remains the biggest weakness. In practical terms, the biggest – albeit indirect – success of the EAEU–BRI relationship is the railway connection between China and the European Union, which benefits from a single space between the Sino-Kazakhstani and Belarussian-Polish borders. Russia’s invasion of Ukraine has not changed this fundamental dynamic. We have not seen any clash between the two initiatives. Its practical component – the railroad link – continues to operate, even if the search for alternative routes bypassing Russia has intensified. At the same time, no practical steps have been taken to genuinely synchronize developments between the EAEU and the BRI.

11.2

TWO VISIONS FOR EURASIA

Whereas the EAEU has a complex genesis and cannot be reduced to being a mere instrument of Russia’s foreign policy, it was the Russian leadership’s determination that brought this project to fruition. As a consequence, the EAEU tends to reflect Moscow’s vision of regional order. This vision fluctuates between the two ends of the spectrum.2 At one end, it is limited spatially to the post-Soviet space and culturally to Soviet-era historical ties. The complex institutional and international-legal framework of the EAEU reinforces this post-Soviet focus, creating a set of barriers between insiders and the outside world. At the other end, there is a long line of attempts to transcend the boundaries of the Soviet and post-Soviet space that can be traced back to Mikhail Gorbachev’s idea of the ‘common European home’, which in the mid-1990s evolved into the concept of ‘Greater Europe’ – a link between Russian-led and European integration processes. Against the backdrop of post-2014 tensions with the West

1 2

For an analysis of the reconciliation process, see Rolland (2019). See also Li (2018). See also Chapter 2 of this Companion.

EAEU and Belt and Road Initiative  155 over Ukraine, the ‘Greater Eurasia’ emerged as the most recent exemplification of the vision of regional cooperation beyond the post-Soviet boundaries.3 Both understandings of regional order share a number of common features, the most important among which are: (a) the aspiration to maintain Russia’s political primacy in the post-Soviet space and to prevent other actors from establishing their presence without Moscow’s at least implicit consent; (b) the willingness to retain the Russia-directed orientation of post-Soviet economies; (c) the desire to fend off any challenges stemming from regional initiatives of other powers; (d) the aspiration to put a Russia-led Eurasia in the position of a link between two economic centres of East Asia and Western Europe; (e) the aspiration to translate successful regional cooperation into an improved position in global politics, both by accelerating the emergence of a multipolar world order and by elevating Russia’s great-power status. To what extent has Beijing’s proclamation of the Silk Road Economic Belt – later distilled in a broader concept of the Belt and Road Initiative – challenged the Russian vision of regional cooperation? China’s BRI was not the first time Russia faced a potential competitor in terms of alternative ideas for rearranging the post-Soviet space. The proclamation of the EU’s Eastern Partnership in 2009 invoked serious resistance from Moscow, even despite the vagueness of the programme.4 As suggested by Scholvin and Wigell, any alternative projects were looked at with suspicion by the Russian ruling elite: The Eastern Partnership of the European Union and China’s New Silk Road initiative clash with Russian aspirations to uphold its historical sphere of influence in Eurasia. This clash is about the projection of economic power. It constitutes geo-economic power politics. (Scholvin and Wigell, 2019, pp. 2–3)

The emergence of the BRI has put China in the position of a potential ‘organizer’ of the Eurasian space (Pieper, 2018). Beijing’s project gained an almost global recognition and became the trademark of both a risen China and its leader, Xi Jinping. The vision of regional and trans-regional cooperation China proposed for post-Soviet states – as part of its global policy – has been qualitatively different from that of Russia. First, Beijing put forward a general concept, one which did not envision the need to follow a specific pattern of cooperation. Instead, China offered complete flexibility for potential partners, emphasizing that its goals included trade facilitation and investment in infrastructure. As a consequence, China chose not to establish any institutional framework for the BRI, relying on bilateral agreements and biennial BRI summits. Second, spatial boundaries of the Chinese project were broad-brushed, with the Silk Road Economic Belt following what was portrayed as the original Silk Road, linking China with Europe via Central Asia and the Middle East. Finally, Beijing remained parsimonious in terms of defining political norms that would underpin international cooperation within the BRI with the exception of invoking the five principles of peaceful coexistence. The slogans of ‘win-win cooperation’ and ‘shared destiny’ were left open to interpretation, further increasing the openness and flexibility of the Chinese project.

On the place of the Russian Far East in Moscow’s vision of a Eurasian order, see Christoffersen (2018). 4 See also Chapter 10 of this Companion. 3

156  The Elgar companion to the Eurasian Economic Union From the Chinese perspective, the existence of other formats of regional cooperation, such as the EAEU, does not undermine the BRI (Godehardt, 2016). The Chinese project did not – at least explicitly – undermine Moscow’s quest for political primacy in the post-Soviet space. Framing its project in flexible and development-focused terms, Beijing downplayed the political dimension, implying it is not interested in political competition in the region. In this sense, the BRI did not pose a direct challenge to Russia’s aspirations. The situation was much more complex with regard to the economic dimension of the Chinese vision of regional cooperation. The emphasis on infrastructure as well as a broader context of the BRI serving as the Chinese version of globalization implied the potential for competition with Russia. The overall weight of China as an economic partner and economic ties already established with post-Soviet states prior to the announcement of the BRI have cast serious doubts on Russia’s capacity to maintain economic influence on the existing level. At the same time, the Chinese initiative could have supported Russia’s aspiration to use its own economic cooperation project as a link between Asia and Europe. In terms of consequences for Russia’s status in international politics, the implications were ambiguous; the Chinese project overshadowed its Russian counterpart with its scale, but Beijing did not seek to undermine the Russian vision. Russia’s response to the BRI not only reflected the complex picture presented above, but also evolved in a changing context of Russian–Chinese and Russian–Western relations. When Xi Jinping officially announced the Silk Road Economic Belt initiative in late 2013 during his visit to Kazakhstan, Russia’s foreign policy already exhibited an anti-Western undertone. Vladimir Putin’s 2012 return to the presidency reversed the modernization and compromise rhetoric dominant during Dmitri Medvedev’s presidential term. Still, Moscow kept its options open and the future of relations with the West as well as with the rising China was not determined in any way. Russia’s room for manoeuvre shrank significantly following the annexation of Crimea and the subsequent conflict with the West, making Moscow much more dependent on Beijing’s goodwill. At the same time, from Moscow’s perspective, the relevance of the BRI as a potential challenge increased along with the failure to convince the Ukrainian elites to join the EAEU. The power-political dimension of the Chinese project has preoccupied the Russian elite much more than the search for practical solutions to growing economic competition from China. As a result, Moscow pursued a two-track policy in response to the BRI. On the one hand, Moscow searched to reconcile both projects by taking a number of steps towards a formal agreement between the two initiatives (discussed in the following section). On the other, Moscow proposed an alternative geopolitical imaginary, the concept of the Greater Eurasian Partnership, or Greater Eurasia. Elaborated by a group of analysts from the Valdai Club,5 Greater Eurasia became an official policy concept in mid-2016, when Vladimir Putin presented it at the St. Petersburg Economic Forum. The Valdai Club came up with the notion of Central Eurasia, a framework which would enable the merging of Russian and Chinese regional cooperation projects. The concept was almost deliberately vague, with a broadly sketched vision of bilateral and multilateral cooperation between major powers and international organizations, with the Eurasian The Valdai Club is an expert and policy analysis platform, which from its inception has regularly been used by the Russian government to promote and test new ideas. Its status is elevated by Putin’s participation in its annual meetings. 5

EAEU and Belt and Road Initiative  157 Economic Union as its core. That way, the Russian elite attempted to connect the two ends of the spectrum.6 In its grandiose scale, the Russian initiative envisions a network of connections between key Asian powers – Russia, China, India – and regional organizations, from the Shanghai Cooperation Organization (SCO) and BRI to ASEAN. Although Moscow portrays Greater Eurasia as a comprehensive connectivity project, it neither seems to be interested in its practical implementation, nor has financial and administrative capacity to pursue such an idea. Instead, the ‘Greater Eurasia’ concept can be interpreted as a ‘face-saving’ exercise that allowed the Russian elite to pretend to themselves as well as to the outside world that Russia was equal to China. With this concept, Moscow demonstrated its strategic independence, its capacity to construct regions, build strategic narratives and to exercise regional leadership. There was no need to discuss Russia’s joining (or not) of the BRI, which would suggest some form of subordination to China. Instead, both states were free to debate how to harmonize their largescale political-economic projects. Once the EAEU and BRI are synchronized, it is China that joins Russia in the process of building the Greater Eurasian Partnership. Thus, the concept of Greater Eurasia made it possible for Moscow to go beyond the boundaries of the post-Soviet space without losing what it perceives as a privileged or special position among its neighbours. Christoffersen interpreted the concept as yet another element of counter-balancing China in the post-Soviet space, a way of adapting to the failure of the EAEU to slow down Chinese economic expansion (Christoffersen, 2018, p. 447).

11.3

RECONCILING THE DIFFERENCES

The complementarities between the EAEU and the BRI can be ascribed to either the features of both projects or to intentional efforts of Moscow and Beijing to reconcile their differences. The main complementarity belonging to the first category stems from the existence of the Customs Union on the part of post-Soviet space used by China as a transit corridor to Europe. Both the establishment of the Customs Union and Putin’s proposal of the Eurasian Union coincided with the first attempts of Chinese central and western provinces to establish railway links with Central and Western European states. The first trains ran in 2011, the year in which the Customs Union between Russia, Belarus and Kazakhstan became operational. The proclamation of the Belt and Road Initiative built on the already prepared ground. The rail corridor via Kazakhstan, Russia and Belarus provides the quickest and most convenient (e.g. electrified) route to link Chengdu and Chongqing with Duisburg in Germany and Lodz in Poland. The very existence of the Customs Union meant that trains crossed only two borders: between China and Kazakhstan and between Belarus and Poland/the European Union. This solution saves both the time and the paperwork for economic participants from China and the EU. The railway connection is operated in the post-Soviet space by the joint Kazakhstani-Russian-Belarussian railway company, United Transport and Logistics Company (UTLC), set up by railway monopolies from the three states. This, in turn, creates a powerful lobby of influential stakeholders working in favour of cooperation rather than competition with the Chinese initiative, especially given the place of state-owned enterprises and state monop-



6

See also Chapter 13 of this Companion.

158  The Elgar companion to the Eurasian Economic Union olies in the political economies of countries that constitute the EAEU. The establishment of the regular railway connection between China and Europe was mostly driven by commercial interests of economic actors, including stakeholders from Russia (Russian Railways, RZhD), with the governments playing a secondary role (Pomfret, 2019; Tjia, 2020; Bucsky, 2020). The above presented complementarities are systemic and reflect different roles played by Russia (and other members of the post-Soviet space) and China in the global economy. The second type of complementarities resulted from intentional actions by key Russian and Chinese leaders and policymakers. This process started in 2014. Point III.21 of the joint communication adopted at the Shanghai summit included the first official reference to both projects: Russia considers China’s initiative to form the “Silk Road Economic Belt” important and highly appreciates the readiness of the Chinese side to take into account Russian interests in the course of its development and implementation. The parties will continue to search for ways of possible pairing of the Silk Road Economic Belt project and the Eurasian Economic Union being created. To this end, they intend to further deepen cooperation between the competent departments of the two countries, including for the implementation of joint projects to develop transport communications and infrastructure in the region.7

The short length of this pronouncement seems to suggest that neither Russia nor China had clear ideas as to how to reconcile the two visions of regional cooperation. At the following year’s summit, Moscow and Beijing recognized the relevance of potential competition by dedicating a separate declaration to both initiatives: the Joint statement on co-operation in the construction of the Eurasian Economic Union and the Silk Road Economic Belt.8 Russia and China explicitly expressed support for the other’s project. More importantly, China declared its readiness to conclude an agreement on economic cooperation with the EAEU. Both sides went even further than merely supporting mutual ideas – they announced that they would ‘coordinate’ their regional cooperation projects. Among the priorities for this ‘coordination’, the document enumerated trade and investment, investment facilitation, and cooperation on transport infrastructure. Moscow and Beijing recognized that the Shanghai Cooperation Organization would be one of the leading platforms, facilitating the process of coordination. In addition, both sides announced the establishment of a working group, which was tasked with the coordination. Following the summit, the Chinese side adapted its yi dai yi lu, or One Belt One Road slogan (no longer used in communication with the external world and completely replaced by the phrase Belt and Road Initiative), coining the term yi dai yi meng, or One Belt One Union. The first – and so far the only – tangible effect of the attempts to coordinate the two projects was the agreement on trade and economic cooperation between the EAEU and China. Negotiations between the EAEU and China that comprised five rounds of talks in total began on 25 June 2016. The talks ended with the adoption of the Agreement on Economic and Trade

7 Sovmestnoe zayavlenie Rossiiskoy Federacii i Kitayskoy Narodnoy Respubliki o novom etape otnoshenii vseobemlyushhego partnerstva i strategicheskogo vzaimodeystviya, 20 May 2014, retrieved from http://​kremlin​.ru/​supplement/​1642. 8 Sovmestnoye zayavleniye Rossiyskoy Federatsii i Kitayskoy Narodnoy Respubliki o sotrudnichestve po sopryazheniyu stroitel’stva Yevraziyskogo ekonomicheskogo soyuza i Ekonomicheskogo poyasa Shelkovogo puti, 8 May 2015, retrieved from http://​kremlin​.ru/​supplement/​4971.

EAEU and Belt and Road Initiative  159 Cooperation between the Eurasian Economic Union and its Member States and the People’s Republic of China in May 2018 (Shakhanova and Garlick, 2020, p. 40). The most relevant aspect of this agreement is its limited ambition. It did not envision any form of a free trade agreement (hence a non-preferential agreement), reaffirming instead the willingness of both sides to facilitate trade and coordinate technical regulations in the future (Shakhanova and Garlick, 2020, p. 40). As part of the attempts to translate ‘coordination’ into practical steps, the Eurasian Economic Commission selected almost 40 projects to be implemented jointly with the BRI (Shakhanova and Garlick, 2020, p. 40). Whereas the Greater Eurasian Partnership remains Russia’s initiative, the Eurasian Economic Commission engaged in the concept’s promotion. Interestingly, it seemed to downplay the role of China and the BRI (Shakhanova and Garlick, 2020, p. 35). In their analysis of the discourse of the Commission’s officials, Shakhanova and Garlick demonstrated that the discourse of the Commission oscillated around ways to limit the competition from other regional projects, including the BRI, and mirrored official Russian discourse on the EAEU– BRI coordination (Shakhanova and Garlick, 2020, p. 42). Nonetheless, the Commission attempted to portray the EAEU and the BRI as ‘complementary rather than competing’ (Shakhanova and Garlick, 2020, p. 42).

11.4

RISKS AND BENEFITS OF TWO EURASIAN PROJECTS

Without doubt, the emergence of China’s BRI project posed the most serious challenge to both Russia’s plans to set up regional economic integration in the post-Soviet space and to Russian–Chinese rapprochement in general. Whereas the appeal of the EU’s Eastern Partnership programme was limited to those states whose elites and societies were inclined to strengthen their cooperation with the West and unwilling to join the EAEU anyway (primarily Ukraine, Georgia and Moldova), the Chinese project, with the promise of support by Beijing’s economic might, was attractive to all members of the Russian-led organization. Thus, the BRI had the potential to weaken Moscow’s grip on the post-Soviet space and thus emerge as a fundamental bone of contention within the otherwise deepening Sino-Russian cooperation. What speaks in Russia’s favour is that the implementation of BRI projects has not weakened the basic link between Central Asian countries and Russia, which is migration. To some extent, the BRI drew away the attention of the Russian ruling elite from the EAEU. While on paper the Russian leadership remained attached to the idea of the Eurasian integration within the framework of the Eurasian Economic Union, in practice it sought for a way to balance the Chinese grand narrative. The Russian elites considered the Chinese project as having the potential to undermine Moscow’s influence in the post-Soviet space, primarily due to financial assets at Beijing’s disposal, which made the project much more feasible compared to the Eurasian integration process moving forward at a glacial pace (Shakhanova and Garlick, 2020, p. 40).The emergence of the Greater Eurasia concept came ultimately at the cost of the EAEU and attention it received in Moscow. The absence of a clash between Moscow and Beijing over regional economic cooperation can be ascribed to two main factors. First, the key features of both projects were substantially different from each other, generating the logic of complementarity rather than of outright competition. Second, both states’ elites undertook intentional steps to manage this potential challenge and strived to avoid a conflict over two visions of regional cooperation. The search

160  The Elgar companion to the Eurasian Economic Union for ways to formally coordinate the two initiatives was supplemented with informal recognition of each other’s interests. Moscow came up with the concept of Greater Eurasia, which, in turn, was recognized by Beijing as a legitimate vision of a broader Eurasian order.

11.5

THE WAR IN UKRAINE

Russia’s war in Ukraine may have far-reaching consequences for the EAEU–BRI relationship, related to bilateral Sino-Russian relations, to Russia’s position in the post-Soviet space – in Central Asia in particular, and to broader Sino-Western relations. Russia’s war in Ukraine has seriously weakened Moscow’s position vis-à-vis China and brought inherent contradictions between Moscow and Beijing to the fore. Beijing has accepted Russia’s justifications for the use of force and unambiguously blamed the US and NATO for the outbreak of the war. Military signalling towards the West continued, with joint air and naval exercises. A strategic-economic dimension to China’s support has, however, been missing. Beijing has not offered substantial financial or economic assistance, nor has it come out to help Moscow bypass Western sanctions. No major investments, mergers or contracts have been announced. China is tempted to capitalize on Russia’s weakness. Western sanctions have been gradually depriving Russia of access to partners, capital and advanced technologies. China might be particularly interested in gaining stakes in Russian energy companies as well as in the Russian upstream. On the other hand, support for Russia would generate a number of risks for Beijing. Economic assistance for Russia, especially its energy sector, will be difficult to hide from Western scrutiny, which, in turn, would make Chinese companies subject to secondary sanctions. China is much more exposed to the world and the globalization process than Russia. The Chinese economy still relies on the openness of the global economy. Moreover, China’s tangible support for Russia may bring the US and European states closer together and strengthen transatlantic unity, a result Beijing has been trying to avoid for the last two decades. This is where the asymmetry between Russia and China matters. For China, even with the process of decoupling initiated by the US and the response in the form of ‘dual circulation’, the West remains an important economic partner, the source of technologies and the market for Chinese goods. Moreover, Beijing is keen on driving a wedge between the US and the European Union. Providing Moscow with substantial assistance or sending unambiguous political signals, such as joint Sino-Russian exercises that would take place in Europe, would weaken this wedging strategy. At the same time, the bottom line is that China does not want to see Russia fail in the war against Ukraine. This would deprive Beijing of a viable partner, leaving China on its own with the empowered US/the West. Russia’s weakening position vis-à-vis China and its weakening grip on post-Soviet space may change the calculus of smaller members of the EAEU. It may push Beijing to increase its influence over the region, pushing Moscow to make certain concessions and allowing for the BRI’s leading role in the Eurasian space. In practical terms, in turn, a prolonged conflict and the increasing scope of sanctions against Russia may lead to a complete shutdown of the railway transport from Russia, especially given

EAEU and Belt and Road Initiative  161 the role of the Russian Railways, RZhD, in controlling the railway route via Russia.9 The war has already accelerated the preparation of to-date less profitable railway routes such as those via South Caucasus states and Turkey. In case China, its European partners and transit states decide to put their weight behind those alternative routes, Russia’s relevance for the railroad link diminishes and the key practical aspect of the EAEU–BRI will lose its role.

11.6 CONCLUSION Russia’s response to the BRI emerging as a competitor to the EAEU can be summed up as an attempt to harmonize both initiatives and to prevent subordination of the Russian one to its Chinese counterpart. This may help to explain why the very agreement between the EAEU and China was insufficient and had to be supplemented with Russia’s own initiative, the concept of Greater Eurasia. The Sino-Russian accommodation of their regional projects and the fact that they did not ‘slip into an unbridled rivalry for spheres of influence’ has puzzled a number of scholars, pushing them to draw on an international relations theoretical repertoire to account for these developments (Christoffersen, 2018, p. 439). This chapter argues that different features of both projects can explain this absence of rivalry. China’s BRI, even if it was initially thought of as a response to the Russian-led EAEU, has not ultimately posed an open challenge to Moscow. The Chinese elite understands regionalism in functional terms, while its Russian counterpart frames regional cooperation spatially. The Chinese vision of regionalism reflects economic prioritization, while for Russia political influence remains key.

REFERENCES Bucsky, P. (2020). The iron Silk Road: how important is it? Area Development and Policy, 5(2), 146–166. Christoffersen, G. (2018). Sino-Russian accommodation and adaptation in Eurasian regional order formation. Asian Perspective, 42(3), 439–462. Godehardt, N. (2016). No end of history: A Chinese alternative concept of international order? SWP Research Paper, 2/2016. Li, Y. (2018). The greater Eurasian partnership and the Belt and Road Initiative: Can the two be linked? Journal of Eurasian Studies, 9(2), 94–99. Libman, A., & Obydenkova, A.V. (2018). Regional international organizations as a strategy of autocracy: The Eurasian Economic Union and Russian foreign policy. International Affairs, 94(5), 1037–1058. Paikin, Z. (2021). Through thick and thin: Russia, China and the future of Eurasian international society. International Politics, 58(3), 400–420. Pieper, M. (2018). Mapping Eurasia: Contrasting the public diplomacies of Russia’s ‘Greater Eurasia’ and China’s ‘Belt and Road’ Initiative. Rising Powers Quarterly, 3(3), 217–237. Pomfret, R. (2019). The Eurasian landbridge and China’s Belt and Road Initiative: Demand, supply of services and public policy. The World Economy, 42(6), 1642–1653. Rolland, N. (2019). A China–Russia condominium over Eurasia. Survival, 61(1), 7–22. Scholvin, S., & Wigell, M. (2019). Geo-economic power politics: An introduction. In M. Wigell, S. Scholvin, & M. Aaltola (Eds.), Geo-Economics and Power Politics in the 21st Century. Abingdon: Routledge, pp. 1–13.



9

See also Chapter 16 of the Companion.

162  The Elgar companion to the Eurasian Economic Union Shakhanova, G., & Garlick, J. (2020). The Belt and Road Initiative and the Eurasian Economic Union: Exploring the ‘Greater Eurasian Partnership’. Journal of Current Chinese Affairs, 49(1), 33–57. Tjia, Y. N. L. (2020). The unintended consequences of politicization of the Belt and Road’s China-Europe freight train initiative. The China Journal, 83(1), 58–78.

12. EAEU and other post-Soviet integration organizations Murad Nasibov and Andrea Gawrich

12.1

INTRODUCTION AND ANALYTICAL FRAMEWORK TO STUDY IO–IO RELATIONS IN EURASIA

The Eurasian Economic Union (EAEU) this Companion is dedicated to is but one of the numerous Eurasian international organizations (IOs) which emerged in the three decades since the collapse of the Soviet Union. The existence of these numerous IOs provides several avenues for regional cooperation and integration. However, the intricate web of IOs requires a nuanced examination of their efforts in tandem and prompts a complex inquiry into their inter-organizational relations (IO–IO relations). The prevailing perspective in the literature is that Eurasian regional organizations serve the interests of the regional hegemon, namely Russia, which has the capacity and ambition to manipulate regional dynamics to its advantage (e.g. Russo and Gawrich, 2017).1 Nevertheless, expanding the scope of analysis to encompass the broader landscape of Eurasian international organizations (see on the state of the art: Aris, 2011, 2013; Aris and Wenger, 2014; Dragneva and Wolczuk, 2013; Dutkiewicz and Sakwa, 2014; Lane and Samokhvalov, 2015) is essential for a comprehensive understanding of the region’s complex regionalism (see e.g. Biermann and Koops, 2017) and inter-organizational relations (Aris et al., 2018). Despite five of the top ten countries with the most regional organization memberships being in Eurasia (Panke and Stapel, 2016), this area remains woefully under-researched. Recognizing the relational context of environmental connectedness that emerges with the growing number of IOs, nestedness has been offered as one of its dimensions (Blavoukos and Bourantonis, 2017) looking at how IO–IO interactions are embedded within broader IOs and how IO–IO interactions could lead to cooperation through the division of labor (Franke, 2018), competition or coexistence, if functions overlap (see e.g. for EU, NATO and OSCE, Koschut, 2018; Welz, 2018). This approach has been demonstrated empirically to be relevant for the post-Soviet space as well (Gawrich and Russo, 2014; Russo and Gawrich, 2017). The growing density of institutions has also been suggested to result in an array of partially overlapping and non-hierarchical institutions deploying broad norms to avoid inconsistencies – creating regime complexes transgressing the global-regional divides (Raustiala and Victor, 2004). Another structuralist perspective on IO–IO relations – the population ecology approach – suggests that the growth of IOs, the expansion of their task domains and issue linkages requires organizations to coordinate their actions and thus to cooperate, but also to compete for limited resources, visibility and survival (Ries, 2017), resulting in what can be referred to as cooperative rivalry. 1 See also Chapter 10 for a discussion of the literature and how it resonates for the debate on EU– EAEU relations.

163

164  The Elgar companion to the Eurasian Economic Union Building on these theoretical perspectives, this chapter deploys a more fine-grained approach to IO–IO relations, by distinguishing between interplay and interaction as two ways in which IO–IO relations can be understood, to better grasp the Eurasian Economic Union’s relations with other major post-Soviet regional organizations. Although the literature distinguishes between interaction as featuring direct, material, intentional engagement between IOs and interplay as indirect, immaterial and unintentional, the demarcation between the two concepts still lacks sufficient conceptualizations. Five premises lie at the heart of our attempt to further systematize the existing approach. First, no IO is established in a vacuum but into a pre-existing structure (organizational environment). Second, the emergence of a new organization is thus the function of the failure of the environment to deliver a certain outcome, which the new organization comes to fulfill. Third, the “birth” of a new organization impacts the prevalent structure or environment. This impact results not only from IO–IO interactions but also from its creation, presence and functioning. Such indirect influence is to be captured as interplay. Fourth, as a consequence of the first three premises, any interaction between international organizations is inherently embedded within a broader context of organizational interplay. This is particularly evident when IOs meaningfully affect each other despite the lack of physical interaction (Biermann and Koops, 2017, p. 7). Hence, the environment is interactive and reflexive (Aris and Snetkov, 2020), fitting with diffusion-related assumptions. However, diffusion rather looks at the universe of IOs (Jetschke and Lenz, 2013) and less so at individual IOs. The fifth premise concerns the understanding of organizational failure. We posit that the failure of an organization does not immediately and necessarily lead to its fall but only decline in importance and relevance. Moreover, this process is spread over a long time. Even when exogenous conditions, such as the war in Ukraine and the following Western sanctions on Russia, emerge to challenge the operational environment of the organization, it may take a long time to be translated into disruptions in the bureaucratic functioning of the organization but can immediately affect its strategic planning negatively, in particular in terms of IO–IO cooperation.2 That is, under such extraordinary conditions, IOs shift to minimize their operation and focus on the delivery of key functions instead of expanding their relations. Furthermore, interplay occurs either in a normative (through the exchange of norms and values) or utilitarian (if practices in one organization affect the costs of practices in other organizations) form, regardless of whether interaction takes place or not (Brosig, 2011). Interaction, in contrast, refers to direct formal and informal relations between IOs as one type of inter-organizational relation distinguished from the indirect, “unintentional” influence organizations have on each other (Gest and Grigorescu, 2010). Thus, if interaction between IOs occurs on certain policy issues reflecting the purposeful choice of organizations, interplay occurs in domains – part of the surrounding social environment in which the organization chooses to compete or serve. The pure existence of an organization in a domain may affect other organizations, either producing mutually reinforcing effects – or not (Biermann and Koops, 2017, pp. 7–8). Moreover, interaction between organizations is suggested to result in formalization and standardization, while having different degrees of intensity and (a)symmetry (Dijkstra, 2017).

2



See also the Conclusion to this Companion.

EAEU and other post-Soviet integration organizations  165 This analytical frame allows us to explain the EAEU’s relations with other post-Soviet organizations. First and foremost, employing a long durée approach, we explore the organizational interplay in the post-Soviet Eurasia region and explain the EAEU’s embeddedness in this interplay. Consequently, the limited interaction the EAEU has with other post-Soviet organizations is elaborated upon, and conclusions are drawn on how the EAEU’s interaction with other organizations is embedded in the organizational interplay.

12.2

SETTING THE SCENE: EURASIAN REGIONALISM PRIOR TO THE FOUNDATION OF THE EAEU

12.2.1 The CIS: Efforts to Compensate for SU Dissolution and Integration in Increasing Policy Fields The first regional organization in the post-Soviet Eurasian region that emerged immediately following the collapse of the Soviet Union was the Commonwealth of Independent States (CIS).3 Being mostly declaratory rather than regulatory in nature, the CIS, founded between 1991 and 1993, promised cooperation and policy coordination in a large variety of fields from culture to nuclear disarmament, environmental protection, foreign policy and international security (Becker, 1996). This entailed a common economic space as an objective to be achieved as well as the coordination of foreign and security policies. In the absence of any other regional organizations claiming such a broad range of fields, this illustrates the intention of member states to fill the vacuum left by the USSR (Libman, 2011, p. 4). For former Soviet Union (FSU) members, even those that did not foresee closer reintegration, joining the CIS emerged as a response to a highly uncertain future of internal and intra-region security and economic concerns (Hansen, 2013). Two contradictory drivers characterized the political calculations of the early 1990s in the CIS region. On the one hand, broken economic ties and the resulting economic crisis loomed large. On the other hand, the drive for self-determination and winning independence from Moscow prevailed across the region (Abdelal, 2005; Kirichenko, 1994). In the early 1990s, it provided a certain degree of associational ties that minimized the impact of the collapse of the USSR (Libman, 2011, pp. 5–7). Despite high treaty activism, it failed to provide a common economic integration framework, let alone a sense of common identity (Sakwa and Webber, 1999). Non-participation in individual agreements and the lack of implementation characterized the failure of the CIS to reintegrate the post-Soviet space, mostly due to the lack of cohesion among the countries of the region in integration issues or the attractiveness of Western integration opportunities (Hansen, 2013). By 1997, only approximately 15% of the CIS agreements had come into force (Libman, 2007). 12.2.2 The CIS and the EAEU’s Predecessor: The EurAsEC Attempts at economic reintegration began in 1993 with the Agreement on Economic Union, which provided a general framework but lacked clear measures of execution. Therefore, On the path of Eurasian regionalism from its original forms to the EAEU, see also Chapter 3 of this Companion.

3

166  The Elgar companion to the Eurasian Economic Union it remained unrealized (Khabarov, 1995). Similarly, the agreement signed on a free trade zone in 1994 failed to deliver any concrete results due to the problems that arose from the multilateral format. Taken together, these failures constituted at least part of the reason for pro-integrationists to stop pursuing integration in the all-in-together format, and they therefore shifted to bilateral agreements (Borodin and Strokov, 2015, pp. 338–339). Russian President Yeltsin’s strong commitment to reintegrating most, if not all, of the former Soviet countries, was confirmed in 1995 by a decree defining Russia’s strategy towards the CIS region (Becker, 1996, p. 117). The stunning success of nationalists and communists in the 1993 elections to the State Duma paved the way for stronger Russian pursuit of the reintegration efforts in the post-Soviet space (Krickovic and Pellicciari, 2021). Stronger commitment by Russia from this time to integration resulted in the signing of a series of agreements. Between 1995 and 1999, Belarus, Kazakhstan, Kyrgyzstan, the Russian Federation and Tajikistan entered into agreements to establish a customs union, consequently resulting in the creation of the Eurasian Economic Community (EurAsEC) in 2000. Without Russia’s decisiveness, it would hardly have been possible for other member states to establish the Eurasian Economic Community, as the prior 1995 attempts proved. From the power dependency perspective, power differentials between Russia and other CIS member states allowed Russia to induce them to join together for a closer integration path. Uzbekistan’s decision to join the EurAsEC in 2006 (though Uzbekistan left in 2008) led to one of the most interesting and rare cases of IO–IO interaction: the full absorption of the Central Asian Corporation Organization, which was established in 1991, further developed in 1994 and enhanced in 1998, comprising Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan since 2005 (Cornell and Star, 2018, pp. 21–29), by the EurAsEC. Hence, the “birth” of EurAsEC was marked by the “death” of a sub-regional IO, of another regional community. The full overlap in the membership bases of the two organizations and the lack of division of labor between them paved the way to the dissolution of one of these two organizations, while the power differentials played a role in determining which one of these two organizations was to be dissolved. Moreover, systemic constraints of the Central Asian countries (internal conflicts, weak economies, the preoccupation of governments with security issues and remaining dependence on Moscow) left them with little space for maneuver in regionalism, augmenting Russia’s role as a regional hegemon and leading Central Asian countries to bandwagon with Russia in the construction of regionalism (Allison, 2004). Exposing economic structural factors discouraging regional integration within Central Asia, Libman and Vinokurov (2011) found that Central Asian states tend to become more integrated with other countries of the former Soviet Union rather than with each other. With the establishment of EurAsEC, the prospect of the CIS as an organization to provide economic integration in the post-Soviet space, which was at the core of its mission since its creation, came to an end. Nevertheless, the difference in the membership bases of the two organizations – Armenia, Azerbaijan, Georgia, Moldova and Ukraine remaining outside EurAsEC – as well as its coverage of broader policy areas prevented the CIS from being redundant. The relative importance of the CIS emerged in its function of keeping together the outliers of regional integration. Prior to the EurAsEC, the creation of GUUAM in 1997 (GUAM since 2005) posed another challenge to the institutional authority of the CIS and hindered efforts to create a “common economic space” embracing the whole post-Soviet area (Bartlett, 2001). GUUAM member states sought free trade and a Eurasian transport corridor

EAEU and other post-Soviet integration organizations  167 that bypassed Russia and explored integration with transatlantic and European structures (Kuzio, 2000).

12.3

THE EAEU’S SEARCH FOR A POSITION IN EURASIAN REGIONALISM

The emergence of the EurAsEC in 2000 and then its replacement by the EAEU in 2015 took place within a highly dynamic phase of Eurasian regionalism. The 1995–1999 initiatives to create a customs union among some members of the CIS failed, mainly due to Kyrgyzstan’s accession to the World Trade Organization (Libman, 2011, p. 10). However, integrationists learned from the subsequent EurAsEC’s failed attempts to reach closer economic integration during the early 2000s (Borodin and Strokov, 2015, p. 339). Yet, it has also been argued, from a structuralist perspective, that the major reasons for the previous economic integration initiatives were, first, the physical survival concerns of the countries in the region that marked the 1990s, second, the “multi-vector” policies (see e.g. Pikalov, 2014) proclaimed by some regional states in order to benefit from Western support as well as the supports of other international power centers, and third, the lack of a middle class to support economic integration ideas (Kirkham, 2016). A renewed initiative towards establishing a single customs territory and a customs union took place in 2006/2007 within the framework of EurAsEC and originally was limited to Russia, Belarus and Kazakhstan (Mostafa and Mahmood, 2018). Consequently, progress was made through further small steps in several agreements, culminating in a Customs Code from November 2009 (Eurasian Economic Commission, 2009). Quick progress took place through the establishment of the permanent Eurasian Economic Commission (EAEC) of the Customs Union (CU) as well as the Single Economic Space (SES) agreement signed in 2011 (Eurasian Economic Commission, 2011), agreeing to harmonize a wide range of economic and trade policies (Mostafa and Mahmood, 2018). As Belarus and Russia limited a range of (tariff-based) customs duties since 2001 (within the framework of the Union State of Russia and Belarus), the emergence of the CU primarily meant Kazakhstan joining them (Borodin and Strokov, 2015) as a sort of pre-step to the creation of the EAEU in 2014, joined by Armenia and Kyrgyzstan later that year (Mostafa and Mahmood, 2018).4 The EAEU marked the end of a highly dynamic phase of IO–IO interplay in the complex post-Soviet Eurasian IO environment. The launch of the EAEU is the result of institutional learning as a result of the interplay throughout the phase of failed practices. On the one hand, it challenges the assumption that authoritarian regimes are fundamentally not likely to integrate. On the other hand, the nature of autocratic regimes poses certain limits to economic integration (Libman and Vinokurov, 2018). As could be seen, the organizational interplay in the 25-year-long period from the founding of the CIS to the creation of the EAEU was characterized by the CIS’s failure in delivering all-embracing integration and the birth of other specialized organizations (among those, the Collective Security Treaty Organization (CSTO) in the security field is not covered here). The emergence of the EAEU and the CSTO impacted the CIS to rediscover its functions. It

4



Again, see Chapter 3 of this Companion.

168  The Elgar companion to the Eurasian Economic Union is within the context of this complex period of long organizational interplay that the EAEU’s interactions with the CIS and the CSTO take place and are analyzed in the following sections of this chapter. 12.3.1 The CIS’s Decrease of Relevance as an Indicator to Understand the Power of the EAEU In order to fully grasp the interplay between the EAEU and the CIS, it is worth looking at the scope of the CIS’s activities over time, which reflects the EAEU’s emergence in the organizational interplay in post-Soviet Eurasian regionalism. We deploy adopted thematic CIS documents (December 1991 to December 2020) as our indicator (visualized in Figure 12.1) to demonstrate the scope of the CIS’s policy ambition (not the scope of activities as such), signaling to the audience inside and outside Eurasia its intention to contribute to Eurasian regionalism.5 As the high policy ambition in the early 1990s is to be explained by managing the post-Soviet (military and economic) disintegration (rather than pursuing Eurasian integration), this went down towards the second half of the 1990s. The lowest level of adopted documents around 1997 overlaps with bilateral and multilateral agreements between Russia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan, as already indicated above. After GUAM emerged in 1997 (becoming GUUAM when Uzbekistan joined in 1999), Azerbaijan, Georgia and Uzbekistan were coming to the end of the first five-year period of the Collective Security Treaty (CST). All these, in sum, indicate that the integration initiatives outside the CIS may have led to the declining relevance of the CIS. Nevertheless, from 1997 onwards, policy ambitions in the economy and security realm (plus the ambition to improve internal structures) rose again. Hence, rather than exerting a negative influence on the CIS’s ambitions, the emergence of EurAsEC and CSTO led to dynamics of competition within the CIS to increase its relevance. This can be explained through, first, the difference in membership bases between EurAsEC and the CIS, with the latter including more countries. Second, between March 2004 and December 2011, the CIS’s relevance increased as the Economic Court of the CIS took over functions of the Court of EurAsEC (this agreement was discontinued after the Customs Union was established) (Economic Court of CIS, 2021).6 Third, discussions on free trade within the CIS were revived in the early 2000s. However, in the pre-phase of the creation of the EAEC between 2007 and 2011, the CIS’s policy ambition went down again. Nevertheless, a somewhat paradoxical development could be observed between 2011 and 2014, when the CIS policy ambitions in the field of economic cooperation increased, even though political cooperation and CIS internal regulation went down. This, however, has been a catch-up effect of the CIS Free Trade Agreement from 2011 and some sort of spillover effect of the already established CU and the SES, which consequently also required tighter cooperation in the field of security and justice (as the trend in this field for three years following 2011 is up). The increased activism in the field of security in the early 2000s and again shortly in the early 2010s until the creation of the EAEU reflects largely the growing cooperation in non-traditional security issues (see e.g. Russo and Gawrich, 2017). The only category excluded from this figure is interparliamentary cooperation (“межпарламентское сотрудничество”). 6 See Chapter 9 of this Companion on the EAEU institutions. 5

Figure 12.1

Documents (decisions, agreements and declarations) adopted by the CIS

Note: The categorization of the documents belongs to the source. The translation of the titles of categories belongs to the authors. Source: The register of the CIS is available at www.cis.minsk.by.

EAEU and other post-Soviet integration organizations  169

170  The Elgar companion to the Eurasian Economic Union The impact of the EAEU on the CIS, hence both organizations’ interplay, is indicated in Figure 12.1 insofar as the CIS’s ambitions in various policy fields (as well as in internal self-organization) declined after the establishment of the EAEU in 2015, which led to reform discussions (Mikheyev, 2015). However, there have been no significant results so far. 12.3.2 Understanding the Different Scales of Interactions of the EAEU with the CIS, the CSTO and the Union State of Russia and Belarus We study the EAEU’s interactions (with other regional and global IOs and with individual states) based on the initially biannual and later annual strategy documents adopted by its Higher Eurasian Economic Council (HEEC). Throughout the period from 2015 to 2022, the relations between the EAEU and the CIS bodies and its member states are placed as the first priority. Hence, we can observe the ambition to popularize the EAEU among the CIS member states on a general level and to improve the cooperation between its Eurasian Economic Commission and the CIS Executive Committee, as well as other corresponding structures. The EAEU’s 2021 annual strategy paper on foreign relations emphasizes EAEU associate membership as a tool to incorporate CIS member states. That is, it seeks to extend associative membership to those CIS member states which are not members of the EAEU. Hence, we observe a trend to pursue the subordination of the CIS under the EAEU, which is to be understood as a reframing of the Eurasian IO environment and architecture. This is visible in a sort of isomorphism of CIS internal arrangements with EAEU standards, as could be observed in CIS internal free trade initiatives in 2021, which, according to Belarus’s CIS presidency would further harmonize the CIS with EAEU standards and would lead to some spillover of governance standards (BelTA, 2021). Among the various jointly signed documents between the EAEC and CIS bodies, which provide a sufficient framework of inter-organizational cooperation both at a lower level of information exchange and at a higher level of policy harmonization, the memorandum signed between the Eurasian Economic Commission and the Executive Committee of the CIS in 2012 provides a broader cooperation framework, covering a number of fields relevant for both IOs (ranging from technical standards to migration, investment, competition and customs policies to energy, industry and agro-industry). In 2013, the Eurasian Commission and Intergovernmental Statistics Committee of the CIS reached a common understanding of the importance of harmonizing and coordinating their activities, as well as sharing their databases. The cooperation between the EAEC and the CIS bodies was further enlarged following the launch of the EAEU. In 2018, a series of memorandums established a framework of cooperation between the Eurasian Economic Commission and the CIS. In the field of energy, the sides confirmed their intention to coordinate energy policies, carry out harmonization between the common market of the EAEU and the common energy market of the CIS member states and ensure a coordinated approach to energy saving and energy efficiency (Eurasian Economic Council, 2018). Another memorandum signed between the sides concerns policy harmonization in the field of consumer rights. This large variety of joint memorandums allows us to conclude on two major EAEU objectives: First, the intention is to establish closer harmonization between the CIS and the EAEU in terms of standards, data and analysis, and policy-making. The second intention is to promote EAEU associate memberships, so as to step up regional integration with the other CIS member

EAEU and other post-Soviet integration organizations  171 states that are not members of the EAEU, described as the “convergence of multi-level integration processes” by high-level bureaucrats of the CIS (BelTA, 2021). The EAEU’s relations with the CSTO can hardly be compared to its relations with the CIS. Although the EAEU and the CSTO are two blocs complementing each other, the interactions between the two organizations are noticeably low. In contrast, the CSTO and the CIS, along with the Shanghai Cooperation Organization (SCO), as two organizations meeting on the ground of security and stability, have developed close cooperation, particularly on countering terrorism, combating drug trafficking, suppressing illegal arms trafficking and countering organized transnational crime. The Council of Defense Ministers of both organizations, namely the CIS and the CSTO, signed an agreement on cooperation in 2001, followed by memorandums signed in 2011 and 2018 (Oknyanskiy, 2020). No similar degree of cooperation exists between the CSTO and the EAEU. The EurAsEC was occasionally involved in the trilateral format of the CSTO, the CIS and the SCO (Collective Security Treaty Organization [CSTO], 2014), however, the EAEU differs from its predecessor in this regard. This difference can be explained by the gap between the policy areas of focus of the two organizations. That is, one as a military-security alliance, the other as an economic union, although they complement each other, they remain too apart from each other. The ground which renders potential for cooperation between the EAEU and the CSTO is largely occupied by the CIS and other small, specialized organizations such as the EAG. Nevertheless, there may exist some potential ground for the cooperation of both organizations, such as transnational organized crime, particularly on issues concerning the implementation of the agreement signed by the EAEU member states on money laundering (Moskalkova, 2012). In this field, the top executive body of the EAEU – the Eurasian Economic Commission – cooperates with another regional organization, the Eurasian Group on Combating Money Laundering and Terrorist Financing (EAG) (Kabar, 2021) since it received observer organization status at the EAG in 2016 (EAG, 2021). With the signing of a memorandum on mutual understanding between the Eurasian Economic Commission and the EAG on February 12, 2021, the sides acknowledged the need for a new format of cooperation given “the current trends in the world economy, challenges and threats arising in connection with the development of new technologies” (Kabar, 2021). Illegal migration is another issue with cooperation potential between the Eurasian Economic Commission and the CSTO. Following the conclusion of the first phase of “Nelegal-2016” – a large-scale operation conducted by the CSTO to counter illegal migration (Regnum, 2016) – a project of a memorandum on cooperation in countering illegal migration between the Coordination Council of the heads of the competent authorities of the CSTO member states on the fight against illegal migration and the Advisory Committee on Migration Policy under the Board of the Eurasian Economic Commission was proposed. The sides were expected to agree on the exchange of information and analysis, holding joint events and, more importantly, forming common approaches and principles to countering illegal migration. However, subsequently, the process stalled. A second and complementary explanation for the lack of cooperation between the EAEU and the CSTO can be found in the argument about the competing security considerations and economic interests of the overlapping membership bases of the two organizations (Guliyev and Gawrich, 2021; Russo and Gawrich, 2017). The cautiousness of the EAEU member states keen on preventing the organization from developing towards political fields or from just expanding its domain and thus, on keeping its focus narrow (Schimmelfennig et al., 2020), can

172  The Elgar companion to the Eurasian Economic Union justify the lack of initiatives by the member states to drive close contacts between the structure of the EAEU and the CSTO which can potentially increase the IO authority. For instance, Kazakhstan is suggested to enjoy a dual foreign policy, in which in security matters it prioritizes Russia or the Russia-led CSTO as we saw in the example of the deployment of CSTO peacekeepers in response to anti-government unrest in the country on 5 January 2022, while in economic matters it seeks opportunities outside the regional complex (Sussex, 2012). The position of the EAEU member states on the comprehensiveness of a Eurasian Union diverged from the very onset. While Putin’s Russia declared a vision of an all-encompassing Union, the other two key states – Belarus and Kazakhstan – supported the idea of “only economic union” (Busygina and Filippov, 2021). This tension was most visible in Russia’s invasion of parts of Ukraine, which did not receive the expected support from EAEU member states (Mostafa and Mahmood, 2018). Last but not least, the lack of genuine multilateralism within the CSTO – over-reliance on bilateral ties with Moscow (Allison, 2018) – can account for the underdevelopment of direct interaction between the two organizations. Perhaps more interesting relations of the EAEU are with the Union State of Russia and Belarus (USRB), as in this case, the line between interaction and interplay is most blurred. The Union State of Russia and Belarus emerged with the 1999 Treaty signed between these two countries and entered into force already by January 2000 but stalled immediately, as Belarusian President Lukashenko was disappointed about the prospects of his ambitions to rule not only Belarus but the Union state which seemed then more difficult under Putin’s Russia that Yeltsin’s (Marples, 2008). On the one hand, the USRB served as a “bedrock” for economic integration in the region. In fact, Belarus and Russia enjoyed a limited range of (tariff-based) custom duties already since 2001, and the creation of the Customs Union, in a sense, meant Kazakhstan’s joining them (Borodin and Strokov, 2015). Moreover, as an envisioned political union, which is by treaty open to other states, too, the USRB provides the EAEU with the potential for political integration. On the other hand, it emerges as a “hard case” of political integration whose continued failures are obstacles on the way to the closer political integration of EAEU member states. In this sense, it exposes the limits of regional integration among autocracies as well argued by Libman and Vinokurov (2011). It suggests that any phenomenon in the region similar to the Russian-Belarusian political integration would face a stalemate, particularly given that the Ukrainian crisis has increased sensitivities over national sovereignties among others in the region (Vieira, 2017).

12.4

CONCLUDING REMARKS

This chapter examines the relationships between the Eurasian Economic Union (EAEU) and other regional organizations that emerged after the dissolution of the Soviet Union. It identifies two processes in the interaction between international organizations: interaction and organizational interplay. The first regional organization, the CIS, failed to achieve significant economic integration among all post-Soviet countries, leading to the creation of competing projects such as GUUAM and eventually the EAEU. The emergence of the EAEU has decreased the relevance of the CIS, and the EAEU’s declared goal to extend associate memberships to CIS member states not yet in the EAEU could potentially make the CIS redundant. The lack of direct engagement between the EAEU and the Collective Security Treaty Organization (CSTO) may be due to the vigilance of EAEU member states to the expansion of the organi-

EAEU and other post-Soviet integration organizations  173 zation towards political-security domains. The EAEU’s strategy of interaction with other IOs, particularly its associate membership offers, may lead to the further formalization of institutional dominance in IO–IO relations in Eurasia. The IO–IO interactions in the Eurasian region, embedded in the complex long-term interplay among them have recently been further complicated by Russia’s attack on Ukraine and the Western sanctions on Russia as well as the intentions of Russia’s military allies and economic partners to distance themselves from Russia’s engagements in Ukraine. Although the bureaucracy of all the organizations in the region including the EAEU continues running their daily business, the fact of war and sanctions on Russia can be reasonably expected to slow down the IO–IO interactions in the region, and eventually also challenge the importance attached to these organizations. Although the SCO still has a long way to go to turn into an economic union like the EAEU, the September 2022 summit of the leaders of member states hinted already at some shift of relevance in favor of the SCO. In the long term, Central Asia may shift to seeing the SCO as a more reliable organization for economic cooperation. This could potentially trigger a push by Moscow to develop the EAEU-SCO interactions to avoid the Moscow-led Union losing strategic relevance. A similar pattern is already observed in relation to the CSTO-SCO cooperation, which was largely neglected by Moscow with the fear of losing its position to China until the war but after the start of the war in Ukraine, particularly following the CSTO summit in Armenia, Moscow seemed interested in developing the CSTO-SCO cooperation. However, much also depends on whether and if yes, when the economic impact of the Western sanctions on Russia stabilizes. The longer the negative outcomes of the sanctions on Russia continue, the higher may grow the motivation of Central Asian states to restructure the organization to reduce the spillover effect and eventually shift their interest to the SCO as an umbrella organization for economic cooperation. However, one clear impact of the war in Ukraine and the sanctions put on Russia would be on Moscow’s efforts to harmonize the CIS along with the EAEU. Despite Moscow’s growing motivation to consolidate the region, CIS member states’ skepticism would hardly allow this.

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EAEU and other post-Soviet integration organizations  175 Jetschke, A., & Lenz, T. (2013). Does regionalism diffuse? A new research agenda for the study of regional organizations. Journal of European Public Policy, 20(4), 626–637. Kabar (2021). V EAES usilivayut bor’bu s finansirovaniem terrorisma [The EAEU strengthens the fight against the financing of terrorism]. Kabar, February 19. https://​www​.kabar​.kg/​news/​v​-eaes​-usilivaiut​ -bor​-bu​-s​-finansirovaniem​-terrorizma/​. Khabarov, S. (1995). Commonwealth of Independent States: Treaty on creation of economic union. International Legal Materials, 34(5), 1298–1310. Kirichenko, V. (1994). The state of and prospects for economic ties in the CIS. Problems of Economic Transition, 36(9), 39–56. Kirkham, K. (2016). The formation of the Eurasian Economic Union: How successful is the Russian regional hegemony? Journal of Eurasian Studies, 7(2), 111–128. Koschut, S. (2018). Inter(b)locking institutions: NATO, the EU, the OSCE and inter­organizational European security governance. In S. Aris, A. Snetkov, & A. Wenger (Eds.), Inter-Organizational Relations in International Security: Cooperation and Competition. London and New York: Routledge. Krickovic, A., & Pellicciari, I. (2021). From “Greater Europe” to “Greater Eurasia”: Status concerns and the evolution of Russia’s approach to alignment and regional integration. Journal of Eurasian Studies, 12(1), 86–99. Kuzio, T. (2000). Promoting geopolitical pluralism in the CIS: GUUAM and Western foreign policy. Problems of Post-Communism, 47(3), 25–35. Lane, D., & Samokhvalov, V. (Eds.) (2015). The Eurasian Project and Europe: Regional Discontinuities and Geopolitics. Basingstoke: Palgrave Macmillan. Libman, A. (2007). Regionalisation and regionalism in the post-Soviet space: Current status and implications for institutional development. Europe-Asia Studies, 59(3), 401–430. Libman, A. (2011). Commonwealth of Independent States and Eurasian Economic Community. In G. Finizio, L. Levi, & N. Vallinoto (Eds.), The Democratization of International Organizations: First International Democracy Report. Moncalieri: International Democracy Watch, Centre for Studies on Federalism. Libman, A., & Vinokurov, E. (2011). Is it really different? Patterns of regionalisation in post-Soviet Central Asia. Post-Communist Economies, 23(4), 469–492. Libman, A., & Vinokurov, E. (2018). Autocracies and regional integration: The Eurasian case. Post-Communist Economies, 30(3), 334–364. Marples, D. R. (2008). Is the Russia-Belarus Union obsolete? Problems of Post-Communism, 55(1), 25–35. Mikheyev, S. (2015). Integration Processes in CIS and EAEU: Outcome of Meeting in Kazakhstan. Valdai Discussion Club, May 25. https://​valdaiclub​.com/​a/​highlights/​integration​_processes​_in​_cis​ _and​_eaeu​_outcome​_of​_meeting​_in​_kazakhstan/​. Moskalkova, T. (2012). Rossiiya i strany SNG ob”edinilis’ v bor’be s organizovannoi prestupnostyu [Russia and CIS countries united in the fight against organized crime]. Zakonia, December 15. https://​ www​.zakonia​.ru/​blog/​rossija​-i​-strany​-sng​-obedinilis​-v​-borbe​-s​-organizovannoj​-prestupnostju. Mostafa, G., & Mahmood, M. (2018). Eurasian Economic Union: Evolution, challenges and possible future directions. Journal of Eurasian Studies, 9(2), 163–172. Oknyanskiy, V. (2020). O Sotrudnichestve ODKB s SNG i SHOS (Sobutiya, Fakty, Kommentarii) [On the cooperation between the CSTO and CIS and SCO: Events, facts, commentaries]. Mezhdunarodnaya Zhyzn / International Affairs, June 29. https://​interaffairs​.ru/​news/​show/​26794. Panke, D., & Stapel, S. (2016). Exploring overlapping regionalism. Journal of International Relations and Development, 21, 635–662. Pikalov, A. (2014). Uzbekistan between the great powers: A balancing act or a multi-vectorial approach? Central Asian Survey, 33(3), 297–311. Raustiala, K., & Victor, D. G. (2004). The regime complex for plant genetic resources. International Organization, 58(2), 277–309. Regnum (2016). V ODKB podveli itogi operatsii “Nelegal-2016” [The CSTO summed up the results of Operation “Illegal-2016”]. Nur-Sultan. Regnum, November 17. https://​regnum​.ru/​news/​polit/​2206698​ .html.

176  The Elgar companion to the Eurasian Economic Union Ries, F. (2017). Population ecology: How the environment influences the evolution of organizations. In R. Biermann & J. A. Koops (Eds.), Palgrave Handbook of Inter-Organizational Relations in World Politics. London: Palgrave Macmillan, pp. 157–168. Russo, A., & Gawrich, A. (2017). Overlap with contestation? Comparing norms and policies of regional organizations in the post-Soviet space. Central Asian Survey, 36(3), 331–352. Sakwa, R., & Webber, M. (1999). The Commonwealth of Independent States, 1991–1998: Stagnation and survival. Europe-Asia Studies, 51(3), 379–415. Schimmelfennig, F., Winzen, T., Lenz, T., Rocabert, J., Crasnic, L., Gherasimov, C., Lipps, J., & Mumford, D. (Eds.) (2020). The Rise of International Parliaments. Oxford: Oxford University Press. Sussex, M. (2012). Twenty years after the fall: Continuity and change in Russian foreign and security policy. Global Change, Peace & Security, 24(2), 203–217. Vieira, A. (2017). A tale of two unions: Russia-Belarus integration experience and its lessons for the Eurasian Economic Union. Journal of Borderlands Studies, 32(1), 41–53. Welz, M. (2018). Cooperation and competition: United Nations-African Union relations. In S. Aris, A. Snetkov, & A. Wenger (Eds.), Inter-Organizational Relations in International Security: Cooperation and Competition. London and New York: Routledge.

13. EAEU and Greater Eurasia: mission impossible? Jacopo Maria Pepe

13.1 INTRODUCTION1 An ambitious idea, which received a lot of attention in the political debate and in the expert community in the last ten years, is that of a “continental” regional integration in Eurasia: a broad cooperation of countries across the entire continent from Southeast Asia over the post-Soviet space to Europe. Russia’s government spearheaded the initiative of a Greater Eurasian Partnership (GEP), which so far, however, remains only a piece of political rhetoric. The chapter will ask why the Greater Eurasian concept and the idea of a GEP across the entire continent – while having a solid geopolitical and economic rationale – has so far failed to bear fruit and why its impact on the EAEU’s further development of its relations with other integration initiatives, beyond China’s BRI and the EU, will remain limited if particularly Russia does not reconcile its aspiration to act as major pole of economic integration in an “autarchic” EAEU with the economic realities and the need for open regionalism. After the invasion of Ukraine in February 2022, and the imposition of unprecedented sanctions against Russia by the West, the Russian leadership has even more strongly stressed the somehow contradictory strategy of an autarchic integration model and diversified ties across Asia and beyond. For the time being, however, the Ukraine war has not only severed ties with Europe, but will make it even more difficult for Moscow – beyond the energy sector – to intensify and diversify its relations not only within Asia but also within the EAEU itself. There is a vast literature (both books and journal articles) on post-Soviet regionalism, on the Eurasian Economic Union and on the GEP as geopolitical concept but only a few works offer a comprehensive assessment of this process and almost none consider the interaction between structural economic transformation, the EAEU and the geopolitical concept of the GEP. Moreover, almost none deal with the GEP’s actual impact on the EAEU’s relations with other integration initiatives beyond the BRI and the EU. In Eurasian Integration: Challenges of Transcontinental Regionalism Libman and Vinokurov offer the most comprehensive assessment of post-Soviet regionalism and rightly point out the significance of Eurasia and its integration on the world stage, while highlighting its challenges and constraints and pledging for an open regionalism. The book – published in 2012 – does not focus on the EAEU as this was not officially created until 2015. Vinokurov’s Introduction to the Eurasian Economic Union (2018) fills this gap and offers a clear and well-structured assessment of the Eurasian Economic Union, its functioning mechanisms, its limits and potential. The author briefly discusses the EAEU’s evolving relations with other regions and players beyond China and the EU. In Value Chains Transformation and Transport Reconnection in Eurasia (2021) the 1 This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2021S1A5A2A03070343).

177

178  The Elgar companion to the Eurasian Economic Union author of the present chapter offers an in-depth analysis of EAEU value and supply chains and of transcontinental corridors, and highlights the geopolitical and geoeconomics dilemma of Russia’s pivot to Asia. Its focus is, however, mainly on the EAEU’s external relation with the EU and China and on Russia. Conversely, several authors like Voskressenski and Koller (2019), Schulze (2017), Trenin (2021) and Kortunov (2020) focus on the Greater Eurasian concept as a blueprint for political action and as part of Russia’s foreign policy strategy and discourse and Russia–China–EU/US relations. They, however, pay scarce attention to its practical impact on the further development of the EAEU’s relations with other integration initiatives and regions beyond China and the EU. This chapter will address this issue and will be structured as follows. The first part will briefly sketch the origin of the “Greater Eurasia Partnership” concept as part of Russia’s evolving relations with the West, the post-Soviet space and Asia, covering a period from the early 2000s until the outbreak of the Ukraine war. The second part will consider the geo-economic premises of the GEP and briefly present its implementation attempts, while the third section will finally consider the economic and geopolitical limits of the GEP in terms of its impact on the EAEU, particularly focusing on Russia. The conclusion will sum up the major results of the analysis and offer a brief outlook, including the impact of the Ukraine war on the idea of the EAEU and the Greater Eurasia idea.

13.2

THE GREATER EURASIA CONCEPT AND THE EAEU: FROM GREATER EUROPE TO POST-SOVIET REINTEGRATION TO THE BELT AND ROAD INITIATIVE

13.2.1 Greater Eurasia and the Greater Eurasia Partnership: Origin and Purpose The idea of a Greater Eurasia Partnership was first introduced by President Vladimir Putin in late 2015 during his address to the UN General Assembly (Putin, 2015). He further articulated this idea and presented it in an international framework during the International Economic Forum in St. Petersburg on June 16–17, 2016 (Putin, 2016) but the GEP has so far remained quite vague and abstract in terms of actual implementation, leaving the Eurasian Economic Union as its only tangible expression and instrument. Moreover, the GEP – much like the Eurasian Economic Union – originated in Russia’s academic and political elites without major involvement of other member states or countries involved (Karaganov, 2016; Lukin, 2015; Bordachev, 2015). The Eurasian Economic Union’s supranational body (Eurasian Economic Commission) has over the years tried to formulate its own interpretation of the “Greater Eurasian Partnership” as one more aimed at forging trade alliances with external players, rather than focusing exclusively on physical infrastructure expansion and transport issues, and on the BRI. This is, however, a matter of rhetorical nuances as Russia’s vision and interests in the GEP are often translated in the Eurasian Commission’s concepts underlying the EAEU (Shakhanova and Garlick, 2020, pp. 42–44). Simply put, the political idea of a “Greater Eurasia Partnership” – and the concept of “Greater Eurasia” it builds upon – promotes the political and economic cooperation between states as well as regional integration initiatives across Eurasia’s vast space. A major conceptual and geopolitical innovation concerns the geographical definition of Greater Eurasia. Greater Eurasia is geographically opposed to a “small” or “narrow” understanding of Eurasia

EAEU and Greater Eurasia: mission impossible?  179 historically privileged by Russia. In fact, “small Eurasia” traditionally defines only the former Soviet space and more specifically its continental part, covering Russia, Central Asia, the Caucasus and some key eastern European countries like Belarus and Ukraine. On the contrary, Greater Eurasia encompasses states and regions from the Atlantic Ocean to the Pacific, including Europe, the Middle East and the Asia-Pacific. Conceptually and geographically, Greater Eurasia is bordered in the East, West, North and South by the four oceans: the Arctic, Atlantic, Pacific and Indian. Geopolitically and geoeconomically, these oceans are considered part of a “maritime Eurasia” which complements – rather than opposes, as in classic geopolitics – “continental Eurasia”. This implies the creation of a system of multiple regional trade agreements and cooperation arrangements among single countries like China, India, Turkey, Iran, Korea, Vietnam as well as regional institutions like ASEAN, SAARC, the BRI and, potentially, the EU. It should be noted that the concept of the “Great Eurasian Partnership” has been subject to several adjustments and reframing by President Putin since its launch, particularly in terms of countries and regional blocs to be included in the initiative. This fact reflects Russia’s evolving and shifting priorities in its relations with the EU, China, the BRI and broader Asia (Putin, 2015, 2017). In the framework of the Greater Eurasia concept, the Eurasian Economic Union is not only the most effective instrument to integrate the former Soviet space after a series of failed attempts but is also perceived as a tool to multiply Russia’s influence beyond this space. In Russia’s view the EAEU has turned from an instrument to maximize Moscow’s influence vis-à-vis the EU into a leverage to participate in the new “regional world order” (Voskressenski and Koller, 2019) particularly visible across broader Eurasia. 13.2.2 At the Beginning was “Greater Europe”: From Lisbon to Vladivostok, 2001–2010 In Russia’s narrative and perception, both inside the political elite and among the broader academic and think tank community, the “Greater Eurasia Partnership” is considered a natural response to the failed concept of “Greater Europe”. After the end of the Cold War, the West’s vision of a continental integration was originally based on a Europe/EU-centered Eurasia where Russia – just like any other post-Soviet state – could only participate by naturally converging to and harmonizing with Europe’s democratic values, economic model and business practices (Emerson, 2004; Bordachev, 2016). The partnership would be grounded on the EU’s norms and the premises of the respect for democratic principles and human rights. As Russia increasingly refused the role of a “patronized junior partner” in favor of a distinct civilization and an alternative, “non-liberal” Europe, the idea of a norm-based partnership with the EU began to vanish. In the early 2000s, and particularly in the first years of Putin’s first term as President, Russia itself embraced and tried to shape the vision of a “Greater Europe” where Russia would play an active and autonomous role but embedded in Europe’s economic order. By revitalizing Gorbachev’s idea of a common European home based on a partnership among equal, though distinct partners, “Greater Europe” was Russia’s attempt to respond to the Western vision. At this stage, Russia’s “Greater Europe” (Trenin, 2021, pp. 335–336; Karaganov, 2009) was based on a functionalistic and norm-free proposal of a continental-wide economic integration “from Lisbon to Vladivostok” but built up almost exclusively on trade and economic complementarities between Europe and Russia with no reference to China and Asia. For instance, the proposal for a modernization and energy partnership with Europe

180  The Elgar companion to the Eurasian Economic Union dates back to 2001, when President Putin addressed the German Bundestag shortly after the September 11 terrorist attacks. The offer was revitalized ten years later – under already changed conditions – during a visit to Berlin. Then-Prime Minister Putin went so far as to propose a free trade agreement between the European Union and Russia, this time as an instrument to overcome the economic and financial crisis which had hit hard both Europe and Russia (Putin, 2010). However, while Russia has rhetorically stressed its interest for deeper economic and trade cooperation with the EU and its member states, it remains doubtful whether the leadership’s intentions were genuine. Russia’s understanding of its role as both a geopolitical/military and energy/geoeconomic superpower at the center of Eurasia results in relatively protectionist trade and industrial policy (its WTO membership notwithstanding), in a monopolistic dominated foreign energy policy and in a closed and autarchic understanding of regionalism. For instance, the Russian economy remains less open than the most developed countries and only somewhat more open than the leading developing countries (Obolenski, 2017, p. 5). 13.2.3 Post-Soviet Integration and the EAEU: The Last Attempt to Build “Greater Europe” Russia’s ambiguity in its relations with Europe and the EU during the first decade of the twenty-first century became all too visible in the four years between Putin’s proposal of a Russia–EU free trade agreement and the outbreak of the Ukraine crisis. This was a transition period for Moscow, where the dilemma between an open or a closed form of regionalism, between protectionism and autarchy on the one side and liberalization and free trade on the other, added to the historical dilemma of Russian political and cultural identity: European, Asian or neither of the two. These dilemmas coexisted ambiguously while Asia started emerging as a new vector in Russia’s foreign policy; Moscow still looked to Europe but felt increasingly ignored and marginalized. The launch of the Eastern Partnership initiative, the EU’s refusal to discuss Putin’s proposal of a free trade agreement while resuming negotiations with Ukraine for an association agreement, including – prospectively – a deep and comprehensive trade agreement convinced Russia to turn more decisively toward its own neighborhood as a source of power and influence. Already in 2011, in an article for the newspaper Izvestia (Putin, 2011), Putin published a political-electoral manifesto which marked Russia’s “return” to the post-Soviet space and Eurasia after decades of detachment and lack of interest. Putin proposed the creation of the Eurasian Economic Union in the heart of Eurasia with Russia as its driver. President Putin’s idea was to advance from an integration core (the Russia–Belarus–Kazakhstan Troika) to a Union, ultimately covering most of the post-Soviet space as an integrated region with Russia in the role of a coordinator, but in a clear leading position, thus assigning a geopolitical and not just economic dimension to the project. This attitude led to the scarce involvement of and the half-hearted support by other EAEU members, starting with Kazakhstan. The return to the post-Soviet space remained therefore instrumental to external relations. However, in its early stage, the idea of a Eurasian Union still targeted the EU as the principal political-economic partner and only secondarily the Asia Pacific or, for instance, China.

EAEU and Greater Eurasia: mission impossible?  181 13.2.4 The “Greater Eurasian Partnership”, the EAEU and China’s Belt and Road Initiative (from 2015 to the Ukraine War) When the EAEU was formally launched in early 2015, the political premises for further deepening political and economic ties with the EU were in fact already compromised. The first Ukraine crisis had left profound and long-lasting scars on EU–Russian diplomatic relations, further fueling reciprocal mistrust and estrangement, eventually culminating in Russia’s invasion in 2022.2 Economically, a bilateral sanction regime had compromised bilateral trade, with the German–Russian signature of the Nord Stream 2 Pipeline Project in 2015 representing the most controversial exception to this trend. Conversely, in the East, China was emerging not only as a financial, economic and commercial partner but as a truly geopolitical alternative to the West. Russia assumed that the Eurasian continent would be now integrated from the East under less normative premises and without conditionalities in terms of political system and economic model. Sino-Russian ties had been strengthening greatly at least since 2005, when both powers signed a border agreement putting an end to 40 years of negotiations and accelerated in the wake of the 2008 financial and economic crisis. During the unfolding of the global economic and financial crisis, when China was apparently hit less hard than the West, Russia started indeed looking East as an alternative source of investments and as a new market for its resources. Trade between the two countries – already growing before the outbreak of the crisis – experienced a steep increase in the period 2010–2014, culminating with the signature of a path-breaking gas delivery agreement in 2014 (Gazprom, 2014). After declining in the years 2014–2015, trade has been regaining momentum, notwithstanding the stagnation of the pandemic years (Figure 13.1). It was, however, not until May 2015 – a few months after the official launch of the Eurasian Economic Union – that President Putin signed a joint declaration with President Xi on deepening cooperation and coordination between the Eurasian Economic Union and China (President of the Russian Federation, 2015). It was on this basis that President Putin launched the concept of the “Greater Eurasia Partnership” later that year, as the conceptual pendant to the BRI. With that, he also started to reorient the EAEU’s geopolitical scope. From an instrument to integrate within Greater Europe the EAEU has rhetorically turned into the principal tool to forge a geopolitical axis with China based on transport infrastructure and trade integration. Russia’s hope was at this stage twofold: to leverage the BRI and accelerate the Far East’s socio-economic and infrastructural-industrial development and, second, to create a common transit and transport space to facilitate the creation of East–West transport corridors not bypassing Russia’s territory (Pepe, 2020, pp. 305–324). The years after 2015 have, however, proven that, while the axis with Beijing is for Moscow irreversible particularly when it comes to opposing the liberal international order and the West, Russia has grown increasingly uncomfortable about its role as junior partner in a relationship which is clearly unbalanced in Beijing’s favor (Lo, 2017, pp. 1–46).3 Against this backdrop, Russia’s decision to invade Ukraine in February 2022 has dramatically shifted the global and continental geopolitical tectonic, potentially deepening the



2 3

See Chapter 10 of this Companion. See also Chapter 11 of this Companion.

182  The Elgar companion to the Eurasian Economic Union

Source: Own calculation based on International Monetary Fund, Direction of Trade Statistics.

Figure 13.1

China’s trade with Russia 2000–2021, in billion USD

imbalances in the China–Russia relation while eventually killing off any chance of deeper EU–Russia trade ties and hence of a more balanced and “open” Eurasian integration. In fact, the war likely marks a “point of no return” in political and commercial relations with the West and with the EU in particular. The unprecedented sanctions imposed on Russia by the EU (along with the US and some key Asian countries) will presumably sever trade, technological, financial and even energy ties between the EU and Russia for the time being and – in some cases – potentially for good. Even the Nord Stream 2 Pipeline, the last-standing example of Russian–German infrastructure cooperation, was suspended a few days before the war amid the rapidly deteriorating situation at the Ukrainian–Russian border, triggering a reorientation of Germany’s traditional energy policy from continental, land-based gas supplies from Russia to maritime, LNG supplies from the US and the Middle East. With the Western option presumably gone, the reconfiguration of the geography of trade and energy flows leaves Moscow not only dramatically exposed to Western sanctions but also increasingly dependent on China.

EAEU and Greater Eurasia: mission impossible?  183

13.3

THE “GREATER EURASIA PARTNERSHIP” AND THE EAEU: BEYOND CHINA?

13.3.1 Greater Eurasia and the Gravitational Shift from West to East Doubtless, the idea of a greater Eurasian Partnership looks like more of a rhetorical response to the country’s difficult geopolitical environment, as Russia appears – and with the Ukraine war in fact is – increasingly squeezed between isolation in the West and the role of China’s “junior partner” in the East. However, the concept retains its intellectual validity even under the dramatic changed geopolitical circumstances. It reflects two major geopolitical and political-economic realities in twenty-first century Eurasia. First, the growing centrality of China for greater Eurasia. The supercontinent – as conceived by Russia as a web of multiple actors, integration initiatives and regional organization including the CIS, Southeast Asia, ASEAN, India and the Middle East – has in the past 20 years experienced a dramatic increase in China’s influence as a source of trade and investment. Conversely, the EU’s share in trade with the vast supercontinent has relatively declined, even though the EU remains the principal trade partner for many countries in Greater Eurasia. This fact becomes clear when considering China’s dramatic export increase to Greater Eurasia since the early 2000s as compared to the EU’s exports (Figure 13.2). In 2021, China’s exports to Greater Eurasia, thanks to an export surge particularly to the Middle East and developing Asia, surpassed for the first time the value of EU exports.

Source: Own calculation based on International Monetary Fund, Direction of Trade Statistics.

Figure 13.2

EU and China exports to Greater Eurasia, aggregated by subregions, in billion USD, 2000–2021

184  The Elgar companion to the Eurasian Economic Union Not only the speed of this increase but also the absolute value of trade points toward an emerging political-economic and commercial convergence between Greater Eurasia and China which Kent Calder refers to as “continentalism” (Calder, 2011) and where the EU – while still dominating – has been losing market shares. Second, potential new poles of growth and trade are emerging beyond China, particularly in the Indian subcontinent (Starr et al., 2015, pp. 51–61) and in Southeast Asia. The emergence of a new regional trade architecture confirms a trend toward a more regionalized and fragmented global economy and a more diversified Asia, reinforcing the economic argument for a “Greater Eurasian Partnership”. According to the International Monetary Fund, from 2022 on, some emerging and developing Asia countries, including ASEAN countries, are set to bounce back from the pandemic years more rapidly than China, with Vietnam, Indonesia and India among the fastest-growing (between 6% and 8%) (IMF, 2021, p. 8). In this respect, the recent RCEP agreement (Regional Comprehensive Economic Partnership), that entered into force on January 1, 2022 (RCEP, 2021), while a clear geopolitical gain for China, also comes at a geo-economic price as it is the result of a compromise, particularly with the advanced economies of Japan and Korea. In fact, its streamlined and cumulative rules of origin provisions actually seem to offer many different possibilities for Northeast and Southeast Asian companies to build their regional value chains independent from China’s production networks. 13.3.2 Implementing the Greater Eurasian Partnership: EAEU Trade Agreements Beyond China Whether the Eurasian Economic Union can capitalize on these developments remains doubtful, however, even more so after the war. Since 2015 the Eurasian Economic Union has tried to tap into the potential offered by the combined effect of China’s centrality in Eurasia value and supply chains and transport corridors and the chances offered by the emergence of an alternative pole of growth in developing Asia. By doing so, Russia has attempted to implement the “Great Eurasian Partnership”: deepening and prioritizing relations with China and the BRI while diversifying economic ties with a vast number of Asian (and Middle Eastern countries) as well. The declared goal is to integrate more deeply in Asia’s value and supply chains. Astonishingly, however, while the GEP proposal catches new realities on the ground, the EAEU members, including Russia, remain fairly marginal in Asia’s value and supply chains. On paper, the economic structure of the most important EAEU members – Russia and Kazakhstan – is highly compatible with both the more advanced manufacturing poles of the EU and China. Until the outbreak of the war, the EU was still the greatest trade partner of single EAEU countries, including Russia and Kazakhstan. Considering the lack of any institutional dialogue between the EU and the Eurasian Economic Union and the failure in establishing any trade facilitating agreement between the two blocs, the potential for further integration of the value and supply chains between them already remained largely untapped before the war. With the Ukraine war unfolding and with sanctions severing trade and energy ties, any agreement of this kind remains politically impossible for the time being and trade relations are set to be drastically reduced, at least with Russia. Conversely, particularly exports from the CIS to China have increased rapidly, mainly driven by Russia’s growing oil and then gas exports to China and – to a lesser extent – Korea and Japan.

EAEU and Greater Eurasia: mission impossible?  185 As a consequence of the war and Western sanctions, Russia will now need to bet even bigger on the Chinese market to compensate for energy export losses in Europe, while India is emerging – at least momentarily – as a major buyer of Russian oil and oil products. Energy flows reorientation might hence prove functional to further deepen trade ties between China and continental Eurasia, but any integration in higher value-added and supply chains remains doubtful. To put things in perspective, exports to Russia – China’s biggest trade partner in the post-Soviet space and in the EAEU – constituted in 2019 only less than 2% of China’s total exports (World Bank, 2019). To date, Moscow has followed a two-pronged strategy: first, it long pushed for a trade agreement with China (though below the level of free trade) and for a greater alignment between the EAEU and Beijing. It was, however, not until 2018 that China accepted to move from bilateral agreements with single EAEU members to an agreement with the EAEU as such (Ministry of Commerce of the People’s Republic of China, 2018). The Agreement, however, covers only customs cooperation and trade facilitation and does not provide for any reduction in either tariffs and non-tariff barriers as this was largely rejected from the Russian side. Currently, China remains in any case the biggest EAEU trade partner and the most significative source of FDI in Asia, with Russia as both the biggest recipient of FDI and the biggest trade partner inside the EAEU. China’s trade with the EAEU as a bloc reached 140 billion USD in 2019 (before the COVID pandemic outbreak), from 90 billion USD in 2015 while China’s FDI stock reached about 12 billion in the same year.4 Even in case of a more comprehensive agreement, however, it would only reinforce the asymmetry between the EAEU members and China (Kofner, 2020). Second, to reduce the overdependence on China and in line with the Greater Eurasia Partnership idea of multiple agreements with several other Asian countries and regional blocs, between 2015 and 2020 Russia promoted the negotiation of more than 15 trade agreements between the EAEU and countries in both Asia and the Middle East. In Asia, the most comprehensive are those with Vietnam and Singapore. The EAEU signed and ratified its first free trade agreement with Vietnam in 2015 (WTO, 2015) and in the following years, its first and to date only comprehensive free trade agreement with Singapore. The Agreement has not yet entered in effect but it is supposed to also serve as a pathfinder for an FTA between the EAEU and ASEAN (Kazinform, 2019). Besides Vietnam and Singapore, the EAEU has been trying to negotiate a free trade agreement with India (ADB, 2021a), Indonesia, Cambodia, Thailand and South Korea (ADB, 2021b) but all these attempts remain so far at the level of a memorandum of understanding (MoU) or ad hoc working groups (Vinokurov, 2020, p. 2). In the Middle East, the EAEU has entered into negotiations with several countries, most prominently Egypt and Israel, but the most relevant free trade agreement is the one signed with Iran in 2018 which entered into force in 2020 even though it covers only 55% of bilateral trade (Eurasian Economic Commission, 2018). The EAEU – under Russia’s impulse – has hence been keen to both deepen and diversify trade away from China across Asia and the Middle East by establishing new partnerships for

4 Trade and FDI data retrieved by the author from Coordinated Direct Investment Survey (IMF), Coordinated Direct Investment Survey – CDIS Home – IMF Data, and World Integrated Trade Solutions (World Bank), World Integrated Trade Solution (WITS) – Data on Export, Import, Tariff, NTM (worldbank.org).

186  The Elgar companion to the Eurasian Economic Union a deeper integration in Asia’s value and supply chains or to strengthen ties with crucial political partners like Iran. To date, however, China further dominates EAEU’s trade and investment ties with Asia. In 2019 the EAEU’s cumulative trade with Asian and Middle Eastern countries with which it either has an FTA in place or is negotiating one, reached roughly 215 billion USD while the inward FDI stock reached 25 billion USD. However, trade with China made up more than half of this trade (140 billion USD) according to the data published by the IMF and the World Bank, and roughly half of the total FDI stock. Conversely, the impact on bilateral trade of the only existing and enforced FTA with Vietnam remains low. Trade between EAEU and Vietnam almost doubled between 2015 and 2016 (when the FTA entered into force) but it has since then stagnated at around 5.5 billion USD yearly, while Vietnam’s FDI stock has followed a similar path (IMF and World Bank, 2021).5

13.4

ECONOMIC AND GEOPOLITICAL LIMITS OF THE GREATER EURASIAN PARTNERSHIP

Notwithstanding the strong economic and political rationale underlying the GEP idea, in the years before the invasion of Ukraine, Russia failed to fully profit from current trends and development across Greater Eurasia and the GEP has remained a piece of political rhetoric, a product of Moscow’s evolving relations with the West and Asia more than an effective contribution to integrate the EAEU in continental and global value chains and trade. As a result, notwithstanding its activism in promoting free trade deals across the continent, the EAEU remains a successful but limited integration initiative at the regional level. However, it has so far proven only partially instrumental to Russia’s three-pronged geopolitical goals – to create an alternative to the EU integration model, deepen economic ties with China while hedging its bets by diversifying relations and partnership within Asia. The reasons for this failure are so far both economic and geopolitical, although geopolitical factors might play a greater role. Economically, Russia’s lack of technological sophistication, industrial complexity and financial firepower is hardly an asset to position the country as a regional integration driver and the EAEU as an attractive partner for the integration in high value end value chains. It does not allow for a rapid shift from a resource-based to a technology-based economy. Doubtless, the creation of the EAEU has proven relatively successful when it comes to partially reintegrating the former Soviet space under new premises or when it comes to transcontinental transport corridors, labor markets and unified external trade policy. However, integration in other industrial sectors – including energy – remains so far only superficial (Pepe, 2021, pp. 11, 14). Conversely, at least theoretically major external complementarities between the EAEU and the two major actors in the East (China) and West (EU) could have fostered the integration of the resource base of the EAEU within the broader continent. However, relations with the EU – already severely damaged at a political level before the war – are now de facto put on hold and a decoupling might intensify in the coming years. Conversely, in Asia the EAEU 5 Trade and FDI data retrieved by the author from Coordinated Direct Investment Survey (IMF), Coordinated Direct Investment Survey – CDIS Home – IMF Data, and World Integrated Trade Solutions (World Bank), World Integrated Trade Solution (WITS) – Data on Export, Import, Tariff, NTM (worldbank.org).

EAEU and Greater Eurasia: mission impossible?  187 as a bloc will hardly be able to durably and profitably diversify its energy relations. On the contrary, cheap Russian oil and potentially gas might increase competition not only with Middle Eastern producers but also with Central Asian gas suppliers over the Chinese market. Meanwhile, the surge in Russian oil deliveries to India comes at a high cost, considering the limitation in physical connections and the complex maritime logistics. More importantly, it has no direct benefit for other EAEU members, which have no stake in this business and might be interested in more direct overland connections to Southeast Asia which cross Central Asia and bypass Russia. Therefore, in Asia, the EAEU, but most prominently Russia, remains highly dependent on China’s ambiguous role as principal trade partner, final market and source of investment. Integration in China’s value chains might happen at the lower technological end. Conversely, the EAEU’s potential to attract investments in high value-added manufacturing sectors like green technologies or electric vehicles remains limited. In fact, the structure of the external trade of the Union points to a low participation in global production networks (Eurasian Development Bank, 2019, p. 44). Geopolitically, Russia’s scarce attractiveness as an integration pole, its relative financial weakness and its scarcely diversified production basis, have reinforced the government’s suspicious and cautious attitude toward external trade liberalization, and its ambiguous stance toward the entire project of “Greater Eurasia” as Russia opposes more comprehensive free trade agreements currently under negotiation with some advanced Asian countries like South Korea as it fears negative impacts on its manufacturing industry. The EAEU remains therefore ambiguous in scope and characterized by a growing “geopoliticization”, which has become even more pronounced after the outbreak of the war. Russia’s posture and action does not necessarily match with the interests of the other members nor offer substantial advantages to other external partners. While Russia sees the EAEU as an instrument to maximize its economic power leverage in the region, Kazakhstan or Belarus on the contrary look suspiciously at any attempt to force deeper integration on the gas and electricity markets or to deepen the political-military dimension of the Union. This is even more true after the Ukraine invasion, as Central Asian members are more strongly focusing on fostering cooperation within their region and with external partners, like Turkey.

13.5

CONCLUSION AND OUTLOOK: THE FATE OF THE EAEU AND OF THE GEP AFTER THE UKRAINE WAR – WHAT SCENARIO?

The core analysis conducted in this chapter was written before the Ukraine war began. Already before Russia’s invasion, it was, however, clear that while the Greater Eurasia Partnership might have a solid geo-economic rationale, its conceptualization has been more the result of Russia’s elite and academic political thinking amid changing and evolving foreign policy relations with Europe and China, than a genuine attempt to promote continental integration. The GEP idea might have served as a political-conceptual catalyst able to translate the changing political-economic realities across Greater Eurasia into a chance for the EAEU to live up to this expectation. In fact, the EAEU has proven relatively successful in creating the first form of institutionalized and functioning regional integration initiative since the collapse of the Soviet Union but it has now probably reached its limits as an instrument to further

188  The Elgar companion to the Eurasian Economic Union deepen post-Soviet integration. The EAEU could in fact have turned into the first step of an open regionalism, but it has been negatively impacted by the GEP’s ill-suited conceptualization. The GEP has been narrowly conceived as the projection of Russia’s geopolitical aspirations, fears and ambiguities in dealing with Europe and China, rather than a genuine and open integration project. It has at best remained a piece of rhetoric and at worst it has limited the EAEU’s potential to advance integration and reforms needed to integrate in global and continental value chains. Before the Ukraine war, only a major input to reform, harmonize and modernize the industrial, energy and transport markets of the EAEU with a major focus on energy transition, transport facilitation, green and digital technologies – along with Russia’s clear commitment to open regionalism toward both Europe and Asia, and greater coordination and dialogue within the EAEU partners – could have turned the GEP idea from an empty piece of ambiguous rhetoric into a blueprint for action. The Ukraine war has put an end even to this tenuous hope and idea to build a Greater Eurasia including both Europe and Asia vanishes as war and geopolitical confrontation foster economic decoupling between the West and the rest.6 These events also exacerbate tensions and redesign relations inside the EAEU, turning it from the core of a transcontinental integration platform into an instrument to manage fragmentation and a new balance of power. Russia’s invasion of Ukraine has clearly altered the balance of power of the entire continental landmass but its impact is now particularly strong in terms of the relations between Moscow and other EAEU members. While it is hard to make clear predictions, a scenario where smaller Eurasian states – particularly Kazakhstan – might gain more leverage vis-à-vis Russia and more space for maneuver to distance themselves from Moscow is not unrealistic. In fact, with the war outbreak, Russia has witnessed former friends and allies distancing themselves from the Kremlin, and this trend was especially pronounced in Kazakhstan. On the one side, the sanctions imposed by the West will in the long term exacerbate Russia’s economic and industrial isolation, notwithstanding the country’s ability to redirect its oil and gas supplies to other markets. In this scenario, Moscow might tend to consider the EAEU even more as an internal alternative market and an autarchic bloc to subdue, as the proposal for the creation of a Gas Union with EAEU-member Kazakhstan and EAEU-observer Uzbekistan testifies.7 On the other side, this very approach will further decrease the Union’s appeal in the eyes of the other EAEU members, starting with Kazakhstan, which are now worried over being forced into a project Russia might even pursue by force. In this scenario, while smaller EAEU members will hardly be able to abandon the Union, they will also try more seriously than in the past to strengthen their ties with external powers. This includes but transcends China to expand to India, Turkey, the Gulf monarchies as well as – most prominently – the West, and especially Europe. In this regard the creation of alternative logistic routes to the west and south bypassing Russia as well as the territory of the EAEU can be expected, along with a growing focus on green technologies and the green transition to create additional sources of investments. This process might not mean the end of the Union as a project, though, but a power rebalancing inside it. Particularly Kazakhstan might still be interested in using the Customs Union See also Conclusion to this Companion. See https://​nationalinterest​.org/​blog/​buzz/​energy​-war​-russia​-floats​-central​-asian​-​%E2​%80​ %98gas​-union​%E2​%80​%99​-205971. 6 7

EAEU and Greater Eurasia: mission impossible?  189 with Moscow and privileged relations with the EU to turn into Russia’s main backdoor access for Western products and into a key player in the intermediary trade as long as Western sanctions are in place and relations with Russia which have disrupted Kazakhstan can increasingly leverage this position vis-à-vis the Kremlin while profiting also from the shifts in trade flows and benefiting from the free trade inside the Union. Ironically, the war might even accelerate some structural megatrends across Greater Eurasia sketched in this chapter. Deeper energy and trade ties between Russia, Central Asia, the Gulf, India, China, Southeast Asia and the Asia-Pacific might emerge as the first tangible example of a more fragmented and multipolar world. However, Russia might not profit anymore from its geopolitical dividends. The geopolitical earthquake caused by Moscow’s decision to invade Ukraine, while depriving Russia of the European option, could exacerbate contradictions inside the Eurasian Economic Union and redefine relations both among the EAEU members and between them and external partners, thus leaving Moscow more isolated, weakened and even more asymmetrically dependent on China and the EAEU’s power balance highly altered.

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PART IV PERSPECTIVES

14. EAEU and authoritarian regionalism Alessandra Russo

14.1 INTRODUCTION In spite of a 30-year trajectory of region-building and region-making in the former Soviet area (at the time of writing), the proliferation of regional organizations established ex novo (i.e. created anew in the wake of the disintegration of the USSR) and the multiple memberships featuring the countries of the region in pre-existing institutions (whose enlargement agendas have extended to “Newly Independent States”), the mainstream interpretation of post-Soviet regional integration has been marked for a long time by a Eurocentric perspective (Libman, 2012). All instances of post-Soviet regionalism have been considered in terms of dysfunctionality and non-effectiveness (Russo, 2018). Post-Soviet regional organizations have been frequently referred to as unsuccessful projects that have failed to produce actual forms of regional governance (see, for example, Kubicek, 2009) or to meet the broader expectations of modernization, liberalization, democratization and accomplished transition that the literature has regarded as an intrinsic side effect of regional coordination and cooperation. According to this perspective, the Eurasian Economic Union may be merely seen as the umpteenth embodiment of ink-on-paper, “virtual” (Allison, 2008) regionalism, in spite of being presented by its founders and supporters as an ambitious and unprecedented project and an alternative path to globalization (Lane, 2015). Against the background of deep-seated narratives about post-Soviet regionalism, the latter can and should be considered along different interpretive lines. First of all, the literature on overlapping regionalism seems to explain one of the most evident features of the post-Soviet region, whose countries, according to different configurations of memberships, joined throughout the 1990s the Commonwealth of Independent States (CIS) and the other regional organizations de facto representing CIS subsets, as well as the Organization for Security and Co-operation in Europe (OSCE). In the 2000s, the institutional overlap has been further complicated by the establishment of the Shanghai Cooperation Organisation (SCO) and the Eurasian Economic Union (EAEU). These repeated attempts at regional institution-building despite the alleged low functioning and performance of regional organizations do not necessarily indicate the fiasco of post-Soviet regionalism: overlapping regionalism instead encouraged those states with multiple memberships to adopt a “pick and choose” approach and take advantage of “issue fragmentation” in different multilateral contexts, playing across the available fora, and selecting the negotiation venue in which they can most efficiently advance their preferences (Russo and Gawrich, 2017).1 These dynamics are visible, for example, when looking at the advance of a democracy development dimension within the CIS. For example, CIS member states in particular organized election observation missions through its Inter-Parliamentary Assembly (CIS-IPA), not



1

See also Chapter 12 in this Companion.

192

EAEU and authoritarian regionalism  193 only within the CIS but also in Yugoslavia (2000) and Serbia (2007). While the first team of observers was deployed in Kazakhstan in 1994, the Convention on Standards of Democratic Elections, Electoral Rights and Freedoms in Member Nations of the CIS was not signed until 2002 by the presidents of seven countries (in Chişinău); it entered into force in 2003, having been ratified by five member states (Armenia, Kyrgyzstan, Moldova, Russia and Tajikistan). In addition, the Institute for Monitoring Democracy Development, Parliamentarianism and Suffrage Protection for the Citizens of the IPA-CIS Member Nations was established in 2006. Like the CIS, the SCO developed its own system of electoral observations. SCO observers are dispatched in accordance with the Regulations on the Observer Mission to presidential and/or parliamentary elections and referendums, approved by the Foreign Ministers Council of the SCO member states in 2006; their respective reports have often underlined the fact that the missions respect the principle of political neutrality. Both the CIS and SCO introduced alternative standards for election observation in contrast with those mainstreamed by the OSCE, thus playing the card of overlapping regionalism with a contestatory purpose. As a matter of fact, the OSCE’s Office for Democratic Institutions and Human Rights (ODIHR) has been heavily criticized by several post-Soviet countries, especially since the so-called Color Revolutions unfolded in Georgia (2003), Ukraine (2004) and Kyrgyzstan (2005). OSCE election observation missions were indeed discredited on the grounds that they interfere with the domestic affairs of the observed countries and that they only address OSCE countries “East of Vienna”: in other words, for the violation of the principles of non-intervention in internal affairs and respect for the sovereignty of nations, and the adoption of “double standards”. The second approach overcoming a possibly biased interpretation of post-Soviet regionalism is anchored in the idea that the different “rounds of ‘integration rituals’” (Libman, 2012, p. 51) post-Soviet countries have repeatedly engaged in are instances of “summitry” regionalism. Again, the lack of enforcement mechanisms proceeding from the regional organizations’ treaties and documents does not automatically translate into a political void around these institutional structures. The political leaders of their member states often use these venues to “demonstrate support and loyalty towards one another in order to raise the status, image, and formal sovereignty of their often authoritarian regimes” (Söderbaum, 2012, p. 61). In fact, post-Soviet regionalism (and the apparent hyper-activism displayed by a number of post-Soviet countries when it comes to their multiple memberships in these regional organizations) can be explained as the manifestation of political solidarity and normative consonance among regimes; in other words, as “regime-boosting” regionalism: the main function of post-Soviet regional organizations is thus to support the members’ rulers and keep them in power (Söderbaum, 2004, pp. 68–114). The symbolic nature of this regionalism (Söderbaum, 2010) does not diminish one of its functions, that is, as providing venues where the personal needs and ambitions of presidents, oligarchs and bureaucrats find expression and policy preferences of various regimes are legitimized before both national and international audiences. The third approach proceeds from the second one, considering regional organizations in the former Soviet space in terms of “protective integration” (Allison, 2010), centered on the principles of (regime) stability, non-interference in the internal affairs of member states, and constitutional order, intended as the survival of the domestic structures of power vis-à-vis both domestic and international pressures for regime change. According to this perspective, regional organizations serve the purpose of giving shape and credibility to coalitions of autocrats who collectively express a “conservationist”, non-transformative, status quo-oriented approach, and organize forms of political solidarity against progressive challenges, in order to guard

194  The Elgar companion to the Eurasian Economic Union members’ regime security, defend incumbent elites, and shield them from the interventionist agendas set by external actors or demands for reforms emanating from political opponents and dissidents. In the last decades, at different times, the CIS, the Collective Security Treaty Organization (CSTO), and the SCO have coordinated to provide collective legitimacy and resources to counter-revolutionary policies and/or repressive practices and to the contestation of “Western”/liberal interpretations of democracy (and democracy promotion). Not only have these regional organizations constituted a locus of elite cartelization at the regional level; they also offered the stage for broadcasting alternative democratic scripts, or to predispose their diffusion among the member states – for example, the idea of international democracy – i.e. the promotion of a fair, multi-civilizational and multipolar global order where international standards and rules have to be enacted and implemented in consideration and respect of internal legislations and domestic political contexts (Piras and Russo, 2014); or venues where ideas of “sovereign democracy” and “organic democracy” are promoted, evoking notions of statism and social conservatism. Once more, while member states do not necessarily seek or realize convergence on governance issues, they use some regional organizations to value their national distinctiveness, maintain relationships with other leaders within the framework of an “authoritarian international” (Silitski, 2006), to construct and maintain an “authoritarian cartel” on a regional scale – in other words, to develop regional “strategies of authoritarian resistance” (Ambrosio, 2009, pp. 159–184). These strategies have been noticeably deployed not only in the wake of the Color Revolutions (as already mentioned above) but also in the aftermath of the Arab Spring (Piras and Russo, 2014); interestingly, the literature about authoritarian regionalism has expanded in the last years, both focusing specifically on the Eurasian case and also in comparative perspective (Obydenkova and Libman, 2019). Drawing on the scholarship on regionalism per se and on the international dimension of authoritarian rule (Tansey, 2016) / the globalization of authoritarianism (Glasius, 2015), we can by and large identify the mechanisms through which regionalism is instrumental to the resilience or even the consolidation of authoritarian regimes.

14.2

THE REGIONAL DIMENSION OF NON-LIBERAL ORDERS2

The conceptual frameworks of regime-boosting regionalism and protective integration pave the way to considering regional organizations as instruments for enhancing regime security in 2 As recently pointed out by Waller (2023), much conceptual conflation and overstretch exist around the notions of “authoritarianism” and “illiberalism”, “non-liberalism” and “anti-liberalism”: in his thorough endeavor to disentangle such (not only terminological) confusion, he associates “authoritarianism” with a residual category of political regime, acknowledging that it may come in different structural and organizational shapes and be enshrined in various formal constitutional arrangements. Political practices, rituals and technologies may be illiberal and unfold not necessarily in authoritarian settings. When it comes to the literature on regionalism, however, “authoritarian regionalism” is the most commonly used label to identify regional organizations whose majority of member states are authoritarian or whose leading states are autocracies (Obydenkova and Libman, 2019), and to analyze their role not only in terms of repercussions on institution-building. While less frequently used, illiberal regionalism (Lewis, 2018) encompasses the emergence and consolidation of “shared ideas, norms, and beliefs” (p. 120), on political and social order, providing the elites with a discursive/narrative framework about regional coordination and cooperation, not in line with liberal/Western models of regionalism, against the background of “significant differences in political systems across the region” (p. 131).

EAEU and authoritarian regionalism  195 authoritarian states, especially when they seek ways for strengthening their international status and image as well as accomplishing processes of legitimation, socialization and normalization vis-à-vis their peers. According to this perspective, the link between the membership to certain regional organizations and the resilience or consolidation of the authoritarian regimes of their respective members can be considered almost in terms of causality: regional organizations support domestic elites; complementarily, Libman (2015) interprets this link as a precondition: “the clustering of non-democracies within certain organisations may result from the fact that […] autocracies should find it easier to cooperate with each other than with other regimes […] or that authoritarian countries are less frequently admitted into international organisations created by democracies” (pp. 133–134). The literature also provides for some leads to identify specific mechanisms through which regional organizations strengthen authoritarian regimes: 1. Localization of global templates, blueprints of actions, norms, practices as well as narratives that somehow have a seal of international acceptability and rightfulness. 2. Production/circulation of alternative policies, values and discourses (alternative to the “hegemonic” standards of the West and liberal multilateralism), including tools for transnational repression. 3. Provision of economic support and other material incentives. The first two mechanisms, concerning the redistribution of political/symbolic resources (non-material), have been well documented with reference to instances of post-Soviet regionalism: first, the CIS declared since its foundation a commitment in terms of human rights and democracy; however, this commitment already displayed some ambivalence. The constituent documents indeed enshrined members’ respect for human rights, people’s right to self-determination, universally recognized principles and norms of international law, and the provisions set by the United Nations and the OSCE; and affirmed the intention to “build democratic states ruled by law”. At the same time, the same texts referred to mutual sovereign equality, non-interference in the internal affairs of one another, and the right of the Commonwealth’s people to determine their fate without external intervention, and providing assistance only on the basis of mutual consent. This two-sidedness can be explained by considering that in the early 1990s, the CIS (and its member states) were seeking a place in the international community and trying to acquire the reputation and semblance of a “proper” regional organization (Russo, 2015). In some cases, the reference to the European model was explicitly set down in official documents and statements; in other cases, the influence of the European model was manifest in the acceptance of an emerging “meta-norm” about the transformative impact of regional organizations (Russo and Stoddard, 2018). Second, the CIS – and later, the SCO – equipped itself with its own election monitoring procedures and observers, which I have already discussed earlier in this chapter: in other words, it generated an alternative vocabulary of democracy, using institutions which appear to be monitoring but lack actual monitoring functions. This is the reason why CIS observers can be considered instances of institutional “pseudomorphism” (Russo, 2015): election observation missions are generally considered to be instruments which promote democratic institutions in the observed countries; however, CIS observers do not perform as instruments of governance transfer, but rather as channels of localization of transnational norms, that are thus contested and resisted within the framework of a regional organization. In this case, one can speak of regional organizations as venues for imitative institution-building and creation of facades: the CIS designed institutions resembling the ones “normally” charged with governance transfer,

196  The Elgar companion to the Eurasian Economic Union but with a different purpose from an actual performative perspective. In spite of a supposed “homogeneity of organizational forms and practices” (DiMaggio and Powell, 1983, p. 148), these devices are not “functionally equivalent” to the arrangements developed by other regional organizations (Russo, 2015). Hence, the concept of a “Potemkin politics of regionalism”, that once more does not translate in dismissing post-Soviet regionalism as a deviant, pathological, malfunctioning version of golden standard models of regionalism. Rather, it recognizes that institutional facades can be and are constitutive of post-Soviet politics, and are part of dramaturgic expressions of power that are frequently intrinsic to non-liberal political actors and orders (Russo, 2018). Third, post-Soviet regional organizations can convey shared forms of delegitimation vis-à-vis Western models of international institutions and advance alternative pathways of aggregation. For example, the SCO “Declaration on the fifth anniversary of the Shanghai Cooperation Organisation” sets out the right of its members to be different from Western countries as an internationally credited value: [The SCO] discards “double standards” [and] respects the right of all countries to safeguard national unity and their national interests, pursue particular models of development and formulate domestic and foreign policies independently, and participate in international affairs on an equal basis. Diversity of civilization and model of development must be respected and upheld. Differences in cultural traditions, political and social systems, values, and model of development formed in the course of history should not be taken as pretexts to interfere in other countries’ internal affairs. Models of social development should not be “exported”. Differences in civilizations should be respected, and exchanges among civilizations should be conducted on an equal basis to draw on each other’s strengths and enhance harmonious development. (SCO, 2006)

Fourth, regional organizations can facilitate the diffusion and transfer of legal and political instruments easing the consolidation of alternative concepts of security and stability, especially in the fields of countering transnational organized crime, terrorism, and more recently, radicalization and violent extremism. This may contribute to “reproduce […] the authoritarian power of the state in extraterritorial spaces” (Furstenberg et al., 2021, p. 360), harmonizing repressive legislations (Lemon and Antonov, 2020) and establishing ways of mutually learning security practices targeting dissidents and militants on a transnational, regional scale. Turning to the material dimension of authoritarian regionalism, the literature broadly points to the provision of both military and economic resources. As per the first aspect, in reference to post-Soviet regionalism, one of the most reported examples relates to the organization of military exercises and trainings by the CSTO and the SCO, activities that aim at preventing uprisings and deterring coups (Piras and Russo, 2014; Russo, 2018). The second aspect instead more broadly proceeds from the emergence of “alternative providers of international public goods […] providing development aid, including project finance, stabilization assistance, and concessionary loans” (Cooley, 2015, p. 58). These alternative donors do not condition the distribution of grants and budget support to the improvement of recipients’ democratic credentials, good-governance guarantees and reforms (Cooley, 2015). In addition to these wider dynamics, it is worth adding that through regional cooperation power wielders in authoritarian contexts can retain control over crucial economic infrastructures “so as to generate rents and offer benefits to other powerful individuals” (Stoddard, 2015, p. 10), maintaining and reproducing patronage networks and neo-patrimonial systems where political leaders’ clients and allies profit from the status quo. Furthermore, at the intersection of the material

EAEU and authoritarian regionalism  197 and non-material fields, authoritarian regionalism can establish platforms for creating new rules governing international trade, redirecting trade flows and business opportunities towards selected companies with close ties to the state (Libman and Obydenkova, 2020). All the above shows that, on the one hand, post-Soviet regionalism provides several examples for the varied literature about authoritarian regionalism; on the other, the latter offers productive lenses to overcome a narrow interpretation of post-Soviet regional organizations as just empty containers to be reduced to their institutional embodiments, and to go beyond the tendency of simply counting the number of regional organizations (which have proliferated in this area), looking only at their institutional design and/or their formal and codified expressions (Russo, 2018). However, two gaps appear to be left: first, authoritarian regionalism does not seem to embrace the whole spectrum of regionally-scaled instances of contestation of liberal international orders; on the other, few studies are devoted to specifically considering the most recent instance of post-Soviet regionalism, that is, the Eurasian Economic Union (and the related Eurasian Development Bank and Eurasian Fund for Stabilization and Development) through the lenses of authoritarian regionalism. The next two sections endeavor to fill these gaps.

14.3

POST-SOVIET REGIONALISM AND THE MAKING OF POPULIST ALIGNMENTS

Against the background of the authoritarian regionalism literature, and complementary to it, one may argue that post-Soviet national leaders, parties or movements’ attempts to withstand external and internal threats can also be linked to shared populist repertoires of performances (Moffitt and Tormey, 2014, p. 387),3 echoing the moral and ethical struggle between the people (the national community, but also transnational, cross-border and regional communities) and a wide range of pressures. The literature focusing on post-Soviet politics appears divided on whether the executives and/or the ruling parties across the region can be pigeonholed as “populist” (March, 2017).4 Indeed, this chapter acknowledges that the deployment of populist (or demotic) discourses does not coincide with ideological populism, and focuses on how the definition of “the people” and their “enemies”, as well as a narrative referring to conservatism and the value of traditions, may contour a transnational dimension of populist rhetoric particularly appealing to foreign audiences, aiming to restore or amplify a country’s

3 In this specific context, we make use of the concept of populism as a political style which refers to repertoires of performances used to create political relations in a highly mediatized political arena. While the definitional flaws weaken the analytical capacity of the concept of populism, it is possible to refer to a common denominator of the multiplicity of phenomena that come under the label of “populism”: that is, the constant reference to the people as the depository of virtues to be defended – in other words, the tendency of worshiping the people (Ionescu and Gellner, 1969, p. 4), interpreted as a homogeneous moral entity, a community whose original harmony and unity (Zanatta, 2002, p. 267) is under threat and needs to be restored/protected. 4 March (2017), for example, has argued that there are a number of features of Eurasian political regimes and leaderships (i.e. clientelism, patrimonialism, the “patronal” characterization of presidentialism, personalism) that are to be ascribed to elitism and oligarchy, in sharp contrast with the premises of ideological populism.

198  The Elgar companion to the Eurasian Economic Union status in the international arena (Tafuro Ambrosetti, 2018) and mostly having repercussions in the field of foreign policy (Faizullaev and Cornut, 2016; Tipaldou and Casula, 2019). It may thus be interesting to lay the grounds for investigating the role of regional organizations in the former Soviet area in conveying processes of convergence and diffusion of populist performances and flowing into a “Populist Internationale”.5 In other words, is the functional use of (discursive, and not ideological) populism shaping new expressions of regionalism? As mentioned in the previous sections, during the second half of the 1990s, the former Soviet space was gradually exposed to alternative sets of norms and in the early 2000s both the CIS and SCO turned into platforms where the critiques of Western democratizing practices found a collective voice. On the occasion of the 2000 Kyrgyz presidential election one can observe one of the first explicit references to conspiratory attitudes vis-à-vis unspecified actors committed to sabotaging the domestic politics of post-Soviet countries: the Chairman of the Central Electoral Commission Sulaiman Imanbayev indeed stated that the OSCE, “in assessing the presidential election in Kyrgyzstan in a negative light, is operating under special orders from certain political forces in the world” (Tesemnikova, 2000). Along similar lines, in 2005, Azerbaijan’s President Aliyev delivered a speech before the deputies of the newly elected parliament, noting that “in a number of cases, various political events are being exploited by certain political circles for other purposes” and describing this approach as a “kind of political pressure” on Azerbaijan’s leadership (Mamedov, 2005). By organizing their own election observation missions, both the CIS and SCO may be considered as populist tribunes, embodying the struggle between “the genuine (transnational, Eurasian) people” and “the corrupt Western elites and organizations”. In addition to expressing normative and political frictions, these regional organizations can be interpreted as venues easing dynamics of diffusion, that is, the circulation of discourses, frames and narratives that may also happen through common affiliations and institutional memberships and may lead to normative and performative convergence. One interesting example of “populist convergence” by diffusion is the spreading of similar legislations about the activities permitted to NGOs in several post-Soviet countries: such regulations not only represent a further element of anti-Westernism but also make explicit the identification of “foreign agents” with “enemies of the people” (Dzhibladze, 2013). Another remarkable case of “populist convergence” by diffusion is the legitimation of alternative conceptions of democracy throughout the former Soviet region. The idea of “sovereign democracy”, a concept coined by Vladislav Surkov in a speech in February 2006, proved popular among Central Asian elites (Cooley, 2012, pp. 111–113). As praised by Dariga Nazarbayeva, the daughter of President Nursultan Nazarbayev of Kazakhstan: For a long time, we trod a path to democracy guided by maps prepared in the West. But times are changing. We see more and more countries and peoples in the world refusing to live according to identical patterns set up for them by someone else. Even the failure of the European constitution, was in defense of the national and the home-grown. [It was] in defense of sovereignty. (Kimmage, 2006)

While the idea of sovereign democracy shares a marked element of anti-Westernism and anti-liberalism with the average populist orientation, it carries a “fundamental mistrust

5 About the expression of a normative consonance among political actors at the international level and the formation of international elite cartels, see Higley and Pakulski (2007, p. 18).

EAEU and authoritarian regionalism  199 towards the two concepts of the present democratic age – the idea of representation as the expression of the pluralist nature of the modern society and the idea of popular sovereignty that defines democracy as the rule of the popular will” (Krastev, 2007). The idea of “organic democracy” too was put forward as an alternative to liberal versions of democracy that entail a mechanistic and atomistic conception of the society and make use of outward attributes of democracy, leading to representation without participation. Organic democracy is rather based on the principle of “brotherhood” and implies either an ethno-culturally homogeneous society or “some sort of higher authority […] in deciding the destiny of all the peoples” (Dugin, 1992, p. 22). The idea of “people’s organic unity” has not only been included in the Charter of the CIS,6 but also recalled in different national political discourses. In the mid-2000s, some intellectual circles in Kyrgyzstan inaugurated a debate about “consensus-based democracy” as a “return to old cultural foundations inherent to this [Kyrgyz] society” and “a method of social regulation” where the majority is replaced by public agreements and the ultimate goal is harmony; moreover, the reference to the past and the tradition serves the purpose of rediscovering local values “that united the Kyrgyz and distinguished us as an ethnos” (Institute for Public Policy, 2007).

14.4

THE EURASIAN ECONOMIC UNION: THE ECONOMIC SIDE OF REGIME-BOOSTING?

The story of the Eurasian project began years before the negotiation and entry into force of the treaty on the Eurasian Economic Union.7 As early as 1994, in a speech at Lomonosov Moscow State University, the Kazakh President first imagined the creation of a “new unity” out of a “space that used to be one country”. Integration visions and plans were then revamped in the aftermath of the launch of the European Union’s Eastern Partnership and made explicit through the publication of the well-known article by Vladimir Putin, in 2011, entitled “A new integration project for Eurasia: The future in the making”. The 2011–2015 phase of the Eurasian Economic Union trajectory was indeed molded by external factors too: in addition to the signatures of the EU Association Agreements with Georgia, Moldova and Ukraine, introducing preferential trade regimes (Deep and Comprehensive Free Trade Areas), the Belt and Road Initiative has been launched, initiating a large-scale, China-led infrastructure development strategy. The political and security crises which flared up in Ukraine in 2014, too, had a destabilizing effect for Russia’s position vis-à-vis the other prospective members of the Union. The weight of these external factors probably contributed to framing the Eurasian integration process as a means for emancipation at the international level – as “a chance for the entire post-Soviet space to become an independent center for global development, rather than remaining on the outskirts of Europe and Asia” (Putin quoted in Richardson, 2015, p. 96). As

6 The CIS Charter’s preamble states that the establishment of the Commonwealth proceeds from the historic community of their peoples and from the relations established among them “aspiring to ensure economic and social progress of their peoples by means of joint efforts” (CIS, 1993, 1282), while one of the CIS’s principles (art. 3) is the “spiritual unity of their peoples, which is based on respect for their uniqueness, close cooperation in preservation cultural values and cultural exchange” (CIS, 1993, 1284). 7 See also Chapter 3 of this Companion.

200  The Elgar companion to the Eurasian Economic Union will be detailed in the course of this section, this aspect has been further amplified after the inauguration of Russia’s military offensive in Ukraine. Already since its institutionalization in 2015, the EAEU has been under scholarly examination to grasp whether it represents yet another exercise of regional institution-building with no actual integration results or whether it has served as a trigger in terms of regional governance, thus implementing regional integration agreements (Libman and Vinokurov, 2018). It indeed seems to stand out as its member states agreed mechanisms for joint decision-making (i.e. voting rules, binding decisions issued by the Eurasian Economic Commission with direct regulatory effects for member states, etc.) and granted some authority to bodies that are in principle independent from national proxies and appear to be supranational organs (the Court and the Commission).8 In other words, pooling and delegation are what makes the Eurasian Economic Union different from previous cases of post-Soviet regionalism (Gast, 2017); more broadly, the institutional design of the EAEU seems to inaugurate a new regionalist course: whereas in the Supreme Council and the Intergovernmental Council, member states retain their veto power, decisions, although taken by consensus, have a direct and binding effect for all member states. In the Commission, decisions are taken by qualified majority or consensus (depending on the issue); all member states are equally represented, as the weighted voting that once characterized the Commission of the Customs Union has been corrected. These features are particularly relevant considering the variety of competences the Commission is tasked with, as detailed by Annex 1 to the Treaty on the Eurasian Economic Union: for example, it can be tasked by the Supreme Council to sign international treaties on matters within its competences (art. 6 of Annex 1); and it can adopt decisions with regulatory and binding effect for the member states, that is, directly applicable to them (art. 13 of Annex 1). In addition to the institutional design dimension, the EAEU has introduced other elements of novelty if compared to the CIS or the other variable-geometry experiments multiplied since the fragmentation of the Soviet Union. First, the EAEU was presented as a project aiming at the citizens’ well-being: accordingly, the presidents have often addressed their domestic public (people, nations, citizens) underlining the new material opportunities that stem from the integration process as well as the conveying of a “green agenda” to be enhanced at the regional level (that is, framing the EAEU as a venue for addressing climate, environmental and food security concerns). This move not only added a layer to regime-boosting strategies: that is, regimes seeking their legitimation before both external audiences and internal constituencies; it also implied an endeavor to relaunch the charismatic character of the presidents as the “founding fathers” of the Eurasian project. In other words, the EAEU has been narrated as the acme of the presidents’ political ambitions to organize the former Soviet region, personally addressing “all road forks of integration”:9 the presidents are deemed to “play a definitive role […] not only a role of the bearers of political will, but also those of the main lawmaker”.10 Second, disagreements and differences of opinion among Russian, Kazakh and Belarus presidents Vladimir Putin, Nursultan Nazarbayev and Alexander Lukashenka have not been hidden behind a consensus in appearance and summitry ritual (Russo and Stoddard, 2018). For example, during the pre-Treaty negotiations, the Kazakh and Belarusian positions converged in favor of a technical, issue-specific organization devoted to sectoral cooperation limited to See Chapters 4, 5, 6, 7 and 9 of this Companion. Slepnyov quoted in Russo and Stoddard (2018). 10 Khristenko quoted in Russo and Stoddard (2018).

8 9

EAEU and authoritarian regionalism  201 economic matters, welfare and trade; the Russian vision, instead, was of a more comprehensive and also political Union. By exclusively focusing on the economic dimension of the Eurasian project, the supranational component of integration could have been arguably reconciled with the traditional conservatism of the other post-Soviet regional organizations. In other words, the EAEU, similarly to previous experiments in post-Soviet regionalism, embraces the principle and the mission of protecting member states’ respective national interests, as underlined by President Nazarbayev already in 2014 (“The union is, first and foremost, economic and does not touch on issues of member states’ independence or political sovereignty in the integration process”, quoted in Russo and Stoddard 2018) and reiterated in 2022 by President Tokayev, according to whom “Kazakhstan was a supporter of developing the Eurasian integration on a commercial and pragmatic basis”.11 Whereas framing the EAEU as an economic and technical project was presented as the bulwark for statism and sovereignism, it was exactly this debate that has generated internal tensions over time, especially in relation to Western sanctions repeatedly targeting Russia and Belarus, in response to the 2014 annexation of Crimea, and, since 2020, over human-rights violations and allegations of election interferences, as well as the forced diversion of Ryanair flight 4978 to seize a dissident journalist in 2021, and even more pronounced after 2022. According to Libman and Obydenkova (2022), the war in Ukraine has indeed endangered the depoliticized nature of the EAEU. In April 2022, when the Organizing Committee of the Eurasian Economic Forum met to approve the Forum’s concept, it was decided that one of the sessions planned would be titled “Eurasianism as an idea for uniting people”; and during the Forum itself, President Putin for the first time spelled out a grand (comprehensive and continental) strategy placing the Union at the core of the Greater Eurasian Partnership (GEP):12 “It would be no exaggeration to say that Greater Eurasia is a big civilizational project […] to change the political and economic architecture and guarantee stability and prosperity on the entire continent – naturally, taking account of the diverse development models, cultures and traditions of all peoples”.13 This vision was restated in January 2023 in President Putin’s address as newly-nominated Chairman of the Supreme Eurasian Economic Council (in the framework of Russia’s rotating chairmanship in the Union): further deepening of integration would be pursued in all areas, including the political field – next to the economic, industrial, financial and technological ones; and the Union would become a “center of attraction for all the independent states sharing our values”. He concluded the address: “For over a thousand years our nations have lived together and explored their geographic space collectively. A shared understanding of our historical destiny, recognition of centuries-old economic ties, preservation and strengthening of the cultural and social affinity inherent in the peoples of the Union countries are key to success in all our activities”.14 Beyond Putin’s vision, the (re)politicization of the Union can be traced via the statements of a number of its officials denouncing the sanctions regime.

See https://​eec​.eaeunion​.org/​en/​news/​lidery​-stran​-eaes​-obsudili​-perspektivy​-razvitiya​-soyuza​-na​ -plenarnom​-zasedanii​-evraziyskogo​-ekonomich/​. 12 On the GEP see Chapters 11 and 13 of this Companion. 13 See https://​eec​.eaeunion​.org/​en/​news/​lidery​-stran​-eaes​-obsudili​-perspektivy​-razvitiya​-soyuza​-na​ -plenarnom​-zasedanii​-evraziyskogo​-ekonomich/​. 14 See https://​eec​.eaeunion​.org/​en/​news/​obrashchenie​-prezidenta​-rossiyskoy​-federatsii​-vladimira​ -putina​-k​-glavam​-gosudarstv​-chlenov​-eaes​-po​-s/​. 11

202  The Elgar companion to the Eurasian Economic Union Already in June 2021, the Russian Deputy Foreign Minister Alexander Pankin released a statement suggesting that the Eurasian Economic Union was working on a “consolidated response” to Western sanctions against its members. The Kazakh Minister of Foreign Affairs reacted to that statement declaring his opposition to the politicization of the Eurasian Economic Union.15 However, in October 2021, Belarusian Deputy Prime Minister Igor Petrishenko publicly declared that the Eurasian Economic Union had developed a toolkit of measures to deal with the sanctions pressure – measures that will be requested of and decided by the Supreme Eurasian Economic Council. Looking at how this governing body functions, this innovation seems to have a rather symbolic and declaratory value, presenting the Eurasian Economic Union as an instrument of contestation and resistance vis-à-vis foreign policy tools employed by third countries against its member states. Whether as a rhetorical device or an actual policy, the anti-sanction stance has explicitly morphed into an anti-Western posture after 2022. On the occasion of the first Eurasian Economic Forum, which took place in May 2022 in Bishkek, a few participants were rather vocal on that aspect, including representatives of the Eurasian Economic Commission (e.g. with Sergei Glazyev stating that “We are suffering from sanctions, trade wars and direct aggressions […] We […] create relations in the spirit of compliance with international law and transparency”) as well as members of national and international delegations. For example, in the words of Andrey Belyaninov (Secretary General of Eurasian Peoples’ Assembly): “If there were no sanctions, they would have to be invented. What was previously a kitchen table talk has now become real and topical”. In particular, it was the Chairman of the Board of the Eurasian Economic Commission Mikhail Myasnikovich who perhaps conveyed the most peremptory messages about this issue: he repeatedly affirmed that “sanctions are a sign of weakness” of those countries that are unable to compete with sanctioned economies on lawful and “civilized” grounds,16 and that “the Eurasian Economic Union has potential to face up to unprecedented challenges artificially created by Western countries”. Taking a step further, Myasnikovic’s advisor Vladimir Kovalev, in the context of his participation in the St. Petersburg International Legal Forum, emphasized that the EAEU may enshrine a new model of human rights protection, based on the plurality of approaches to their content and interpretation and ensuring sustainable socio-economic development.17 Further, and even more overtly, during a meeting of the Eurasian Intergovernmental Council, Russia’s Prime Minister Mikhail Mishustin blamed the “collective West” for having disrupted trade ties, transportation corridors and logistic chains, thus hitting hard the Global South.18 Assessing the practical effects of the sanctions on the economies of the EAEU’s members is not straightforward, especially after Russian authorities’ decision, in April 2022, to restrict disclosure of foreign trade statistics, including those relating to exports, imports, and trade within the Union itself.19 When Russia responded to Western sanctions in 2014 with an embargo on the imports of certain agri-food goods from sanctioning countries, a significant part of trade diversion See https://​www​.gov​.kz/​memleket/​entities/​mfa/​press/​news/​details/​212687​?lang​=​en. See https://​eng​.belta​.by/​economics/​view/​myasnikovich​-sanctions​-against​-belarus​-russia​-are​-sign​ -of​-weakness​-of​-countries​-imposing​-them​-150100​-2022/​; https://​tass​.com/​economy/​1558053. 17 EAEU law could become an alternative to global systems of human rights protection that have lost their relevance: https://​eec​.eaeunion​.org/​en/​news/​pravo​-eaes​-moglo​-by​-stat​-alternativoy​-utrativshim​ -svoyu​-aktualnost​-globalnym​-sistemam​-zashchity​-prav/​. 18 See http://​government​.ru/​en/​news/​47681/​. 19 See also Chapter 16 in this Companion. 15 16

EAEU and authoritarian regionalism  203 from the Russian side occurred with respect to countries from the EAEU (Fritz et al., 2017): Russian agri-food imports from its member states overall indeed increased between 2014 and 2016, paving the way to presenting – already back then – the EAEU in its role of alleviating the sanction pressure and replacing Western imports, implicitly attributing it as an (economic) alternative. At the same time, the import substitution policy that was implemented by Russia on that occasion has enabled the producers from Belarus and Kazakhstan to increase their market shares in Russia, obliquely weakening the Kazakh argument against using the Union as a side path for counter-sanctions. Since 2022, Russia’s attempts to circumvent sanctions and a foreign corporate exodus through a so-called “parallel imports” scheme have been transforming the Union’s members into transshipment markets, at the same time vulnerable to the secondary adverse effects (as well as possible complementary sanctions against entities and countries aiding Russia), as well as downgraded from economic partners to a regional archipelago of offshore facilities for a sanctioned economy. Yet, according to an analysis provided by the European Bank for Reconstruction and Development, intermediate trade (along with the business relocation and the influx of social and human capital from Russia) has provided new opportunities for Kazakhstan, Armenia and Kyrgyzstan (Chupilkin et al., 2023). Against this background, there is a widespread interpretation that hardly sees economic cooperation as the main driver for the functioning of the EAEU (e.g. Lane, 2015; Dragneva and Hartwell, 2020, pointing to it as an instance of “integration without liberalization”). Along with these interpretive lines, the EAEU has contributed to the creation of liberalization credential facades, which already started with the Treaty on Functioning of the Customs Union within the Multilateral Trade System (2011), and later played an important role in the process of its member states’ accession to the World Trade Organization (Kazakhstan joined in November 2015, while Belarus was negotiating its accession until blocked in 2022). Similarly to what has been observed in relation to democratization credential facades, the official reports monitoring the integration advancements promoted by the EAEU refer to internationally renowned ratings (e.g. Ease of Doing Business Ranking) measuring the extent to which the EAEU is improving the business environment within the common economic space and the foreign trade mechanisms set by its member states: whether this aspect will translate into the attempt to introduce an alternative vocabulary to assess different pathways to the involvement in the global trade system remains an open question. For the moment, one of the very few sectors where an actual functioning of an internal market seems to be under way is that of labor: the control over labor mobility actually lends itself to decision-making processes within the Union ultimately captured by high-level inter-state political negotiations and does not exclude the possibility of transferring migration governance models to the member states featuring illiberal norms and practices. According to the Treaty, indeed, workers from the member states have the right to be employed in any member state and are entitled to social security benefits for themselves and their family members. The EAEU has hence provided legalized forms of labor migration for Central Asian workers, who have suffered discrimination and persecution for a long time (Wolczuk et al., 2022). It should be added, though, that accessing Russia’s labor market is particularly relevant for both Central Asian migrants and the respective regimes, which rely on remittances for delivering public services and providing public goods, strengthening their international banking situation and the national financial system, and ultimately for ensuring economic (and political) stability in their respective countries (Madiyev, 2021). In this respect, the expansion of labor migration

204  The Elgar companion to the Eurasian Economic Union pathways through the EAEU is to be mentioned among its regime-boosting aids. In this perspective, EAEU serves a regime-boosting function in two ways: on the one hand, regimes can present themselves as caring about the people by protecting the living conditions of migrants; on the other, some sectoral integration of the labor market seems to be achieved, for the benefit of the countries of origin of most of the migration flows within the region.

14.5

EAEU GOES GLOBAL?

In so far as regional integration has been pursued with a statist approach both before and after the 2022 turning point, the EAEU is not that different from the other regional organizations that have been following one another in the former Soviet area over the last three decades. In addition, similarly to other instances of post-Soviet regionalism, the EAEU displays a considerable component of claiming a normalized international actorness or advocating for the normalization of its member states’ agency in broader international venues. It is in these perspectives that one can read the consolidation of an external dimension for the EAEU, which signed or is negotiating the signature of free trade agreements, or less binding memoranda of understanding with Vietnam, Iran, Singapore, India, Republic of Korea, Cambodia, Mongolia, Israel, Jordan, Egypt, Morocco, Greece, Serbia, Chile and Peru. The Union also concluded a non-preferential Trade and Economic Cooperation Agreement with China; and it interestingly established inter-regional formats of cooperation with MERCOSUR, the Andean Community and ASEAN, Thailand and Indonesia. As per the second aspect, it should be noted that especially the interactions between EAEU and SCO have intensified, facilitated by repeated meetings between Myasnikovich and SCO Secretary General Zhang Ming.20 Further, a Memorandum of Understanding between the Eurasian Economic Commission and the Secretariat of the Conference on Interaction and Confidence Building Measures in Asia (CICA) was signed in October 2022 in Astana on the sidelines of the 6th CICA Summit; and even more remarkably, the strengthening of cooperation between the EAEU and the BRICS has been prioritized in several EAEU documents (e.g. “Main Directions for the EAEU International Activities” for 2023 and for 2024; the Action Plan set out by the Eurasian Economic Commission in February 2023 on implementing the Russian chairmanship priorities) and embodied in a dialogue launched between the Eurasian Economic Commission and BRICS’ New Development Bank (whose Eurasian Regional Center is located in Moscow). These trends have been epitomized by an international forum which took place in Moscow, a few days before this chapter was finalized (March 2023), named “The Dialogue of Integrations”: held under the auspices of the Business Centre for Economic Cooperation of the CIS and the Executive Committee of the Commonwealth of Independent States, it saw the participation of representatives and delegations from the EAEU, CIS, SCO and the BRICS. All in all, these occurrences of EAEU going global seem to point to another conduit for regime-boosting, that is, via international legitimation, and by providing international actorness to a regional organization that enshrines a certain degree of resistance and contestation vis-à-vis Western-centric multilateralism.

See again Chapters 11 and 13 of this Companion.

20

EAEU and authoritarian regionalism  205

14.6

CONCLUDING REMARKS

In the last years the EAEU has been under scholarly examination to grasp whether it represents yet another exercise of regional institution-building with no actual integration results or whether it has served as a trigger in terms of regional governance. Like the previous instances of post-Soviet regionalism, it has been too frequently read with Euro-centric, or at least institution-centric, lenses, overestimating regionally-scaled policymaking processes and outputs. In that respect, the chapter has attempted to find connection points between the case under study and the wide literature on authoritarian regionalism, especially focusing on the regime boosting aids the EAEU is expected to provide to its member states: this may cast light on its functioning and, more broadly, fulfill the promise of de-centering comparative regionalism. The current articulation of the EAEU’s activities and priorities also reflects 2022 events: in particular, giving new impetus, internally, to a discourse promoting the Union as an alternative model of (post-Western, if not anti-Western) integration, and externally, expediting the creation of international links with a wide gamut of countries and groupings.

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15. Power asymmetries and integration process: challenges ahead for the EAEU Federico Salvati

15.1 INTRODUCTION Over the last few years, the debate surrounding the integration process of the Eurasian Economic Union (EAEU) has taken on a remarkably political character. Both Russian and Western scholars have often criticized the project because of the evident power asymmetries within its membership. The presence of power asymmetries, however, is not per se a dooming element for integration. The two factors are connected by a complex and nuanced relationship. In investigating it, therefore, one needs always to take into account the specifics of each case study. In this chapter, I try to explore such conditions, highlighting the critical issues concerning the topic of power asymmetries and the integration process within the EAEU. This is not necessarily intended as a commentary on the overall success of the project. My intention is only to emphasize some interesting features worth being discussed by scholars and policy-makers alike.

15.2

THE EAEU AND THE RUSSIAN ELEPHANT IN THE ROOM

When it comes to analysing power imbalances within the EAEU, there is little doubt as to where one should begin. It is clear that Russia is the political pivot of the region and it represents the most influential actor in the area. The country surpasses the other members of the Union by any significant strategic statistic. Russia accounts for over 80% of the bloc’s aggregated GDP and population. Geographically speaking, with a land mass of 17,098,242 km², it surpasses by far the second-largest member of the Union (Kazakhstan: 2.725 km²). Moreover, Russia’s territory spans from the European to the Eastern Asia land mass and it is situated at the centre of the Union’s geographical space, while most of the other members do not even share a common border. Moscow is the 11th largest economy in the world (the closest is again Kazakhstan, which ranks only 54th) and also the 4th largest spender in military equipment. The EAEU can claim, at the present day, a number of relatively meaningful achievements. This includes the creation of a functioning Customs Union, the facilitation of the free movement of people across the vast Eurasian space, and the creation of a single labour market (Vinokurov, 2018). The bloc secures approximately 2.8% of the world’s merchandise exports and 1.4% of service exports (Lissovolik et al., 2021, p. 2). Russia alone, however, (according to ITC data) amounts to 2% of the world’s total export volume with a net worth of 495 billion US$ in 2021 although its global economic role is currently going down as a consequence of the war in Ukraine and the related sanctions). The EAEU is a Russia-dominated space with Moscow accounting for 65% of all the exports in 2018 and 33% of the imports (Bhutia, 2019; 208

Power asymmetries and integration process: challenges ahead for the EAEU  209 Eurasian Development Bank, 2019). The IMF estimates even that Moscow amounts to 79.3% of the total trade turnover for goods within the EAEU (IMF, 2020).1 In the past, the Union has been accused of being affected by a low level of interdependency (Adarov, 2018), which is still a factor that influences heavily the dynamics of the integration process (especially after the 2022 Ukrainian war). Trade within the bloc, after enjoying a sudden rise between 2015 and 2018 (31%), plateaued after this date. EAEU trade, however, has seen a considerable qualitative improvement in its structure over the past few years. Exchange among the members has been boosted, in fact, not only for commodities and agri-food but also for manufacturing and high-added-value products. The consequences of the recent Ukrainian crisis, on the other hand, have hit both Russia and Belarus for which trade has relatively slowed down in 2022 (Bouissou, 2022). Moscow plays, by multiple accounts, the role of the hegemon in the area. Bilateral relations that the junior partners have with Russia are still far more significant than the multilateral dimension of the Union. Consequently, the analysis of these asymmetries can give us great insight into the nature of the integration process and its possible evolution in the near future.

15.3

POWER IMBALANCE AND INTEGRATION: A LITERATURE REVIEW

The theoretical literature on the topic of integration and power asymmetries is quite fragmented in its arguments. Consequently, I will try here to integrate the theoretical background with some comparative perspectives. The relevant theoretical literature is divided mainly into three different segments. The first segment argues that the presence of power imbalances not only does not hurt the integration process but it could even be conducive to its ultimate success (Ruggi, 1998; Kratochwil, 1991; Keohane and Nye, 1989; Wendt, 1999 among others). According to this line of argument, interdependencies and cultural relations can be used to initiate socialization processes that will ultimately lead to the institutionalization of social relations (Koslowski and Kratochwil, 1995; Risse, 2009; Katzenstein, 1996). Consequently, if leaders and hegemons are present in a regional context, they have the opportunity to act as a facilitator of the said process (Antkiewicz and Whalley, 2005; Gowa, 1994; Clarkson, 2008; Coleman, 2005, p. 196; Börzel, 2016, p. 96). Marginal costs for the production of public goods and the presence of enforcement mechanisms can influence the outcome of the process (Stone et al., 2008). A second part of the literature, on the contrary, looks at the presence of power asymmetries in integration as a possible hindrance to socialization and institutionalization dynamics. From this perspective, regional projects are appealing to the hegemon only if they serve the purpose of extending its influence (Waltz, 1979, 1993; Morgenthau and Thompson, 2018; Herz, 1974; Mearsheimer, 2001 among others). If regional hegemons have no concrete incentive to forgo their positions, integration projects maintain a narrow scope and a short perspective (Hummel and Lohaus, 2016; Kanthak, 2012; Frohlich and Oppenheimer, 1970; Gilpin, 1988; Grieco, 1988).



1

Trade relations in the EAEU are discussed in Chapter 4 of this Companion.

210  The Elgar companion to the Eurasian Economic Union Lastly, one can identify the third point of view, according to which the key to understanding the effect of power asymmetries on integration does not rest in their mere presence, but in the quality of the power relations and the posturing of the partners locked into this asymmetric relation. According to Kupchan, asymmetries can be useful for the emergence of regional equilibria, but if the states are not convinced that these asymmetries will translate into a reliable and benign order they will resist integration (Kupchan, 1998). This is pointed out also by the power transition school which emphasizes the pivotal role of legitimacy (Lemke and Reed, 1996; Efird and Genna, 2002). The idea is that under a lack of legitimacy, even small power gaps look problematic and can generate significant attrition. Rueda-Junquera (2006, p. 9), Shams (2003, p. 16) and Hansen (1969, pp. 257–263) claim that rule-abiding behaviour and general political commitment generate steady institutional frameworks and ultimately successful implementations of integration processes. A strong rule of law can indeed help to channel cooperation in the face of considerable power asymmetries. However, this is highly dependent on the regime type of the hegemon and the rest of the membership. As some have demonstrated (Obydenkova and Libman, 2019; Hancock, 2009; Debre, 2021), especially among more autocratic states, more coercive or “hard” methods could be preferred to gain authority and legitimacy within a regional integration process. Similarly to the theoretical literature, empirical case studies reveal that strong power asymmetries and the presence of a hegemon have an ambiguous relationship with the success or failure of an integration process. Much depends on the general conditions of the specific case and how the relations between the hegemon and the junior members are structured. First, one can look at the case of the EU and the role played by Germany in reshaping its institutional life. One can argue that the evolution of the EU given the German pivotal role has been inspired by Berlin’s vision of maintaining a firm regulatory framework while resisting any attempt to pursue joint debt liability and deeper fiscal integration. As Schild (2020) notes, however, Germany’s success as Euro-hegemon has been largely exaggerated. Germany’s stubbornness in pushing back on any proposal that would limit its possibility to capitalize on the status quo eventually, slowed down the integration process (limiting in turn the influence that Berlin could exercise on the Union). The COVID pandemic and the current geopolitical crisis with Russia have only worsened the situation. One can say that Germany’s potential hegemonic moment has lost momentum relatively rapidly mostly due to the uncompromising attitude of the German leadership. It is fair to recognize that the existing power asymmetry between Berlin and the rest of the core members of the Union (France, Italy, formerly the UK, etc.) was never as large as the one existing within the EAEU. This might have contributed to limiting the scope of the achievements that Germany has had in terms of governance and integration. Another interesting case is MERCOSUR and the presence of Brazil as an aspiring hegemonic power. The bloc had been originally conceived both as a way to integrate the member states into the international market and as a political instrument to resist US influence. Brazil on its hand, despite receiving the most benefits from the process, was unwilling to pursue the role of the benevolent hegemon avoiding any commitment that would smooth the power asymmetries or that would create a functioning redistribution system. Increasingly, Brazil’s role became one of a “leader without followers” (Malamud, 2003) and the MERCOSUR project eventually slowed down. Interestingly enough, after this period of crisis, Brazil has found a new and more significant role within the framework of the UNASUR project, which has been frequently referred to as a “post-neoliberal shift away from the neoliberal tenets of marketiza-

Power asymmetries and integration process: challenges ahead for the EAEU  211 tion, commodification, and deregulation” (Ruckert et al., 2016, p. 1584). Deprioritizing trade as a driver for integration has reassured the other junior members creating a more favourable perception of the regional imbalances. Akin to the Brazilian case is the relationship that South Africa established with the other member countries within the SADC at the beginning of the 2000s. The regional bloc was formed in 1992 and in 2003 it adopted a protocol (RISDP) that drew up a Balassa-like roadmap for integration. While South Africa provided leadership for the initial stages of the process, its attitude changed quickly through the years (Söderbaum, 2004). In 2008 the countries within the bloc achieved the liberalization target by successfully creating an FTA. The project came to a halt after 2010. A lack of commitment from the side of Pretoria has stripped the integration process of its credibility. After entering negotiations with the EU unilaterally in 1999, South Africa’s leadership has progressively lost credibility. As Hulse (2016, p. 23) writes, “As a result, whatever leadership South Africa does display … tends to be perceived as being more about capturing a greater market share”. Interestingly enough, is the fact that similar critiques were moved against South Africa in the case of the South African Customs Union (SACU) (which remains the world’s oldest Customs Union funded in 1908 and whose membership partially overlaps with the South African Development Community (SADC) group). After the lifting of international sanctions in 1994 many scholars pointed out how Pretoria assumed the role of the “malicious hegemon” within the group (Alden and Soko, 2005), effectively failing to promote a shared normative and political framework to stabilize the commitment of the smaller members to deeper integration (Hamill, 2016). Finally, an interesting case is the experience of North American regionalism. NAFTA entered into effect in 1994 integrating bilateral agreements that the US already had with both Mexico and Canada. The project was guided by the US leadership and was based on the extreme asymmetry in terms of economic indicators with the other two partners. While on one hand the agreement worked successfully for approximately two decades, it never spilt over towards a deeper, more holistic project. Washington never had enough incentives to deepen the cooperation and critics of the agreement within the US itself even pointed out that the country had to bear most of the costs for its implementation (Chatzky et al., 2020).2 Given the absolute dominance of the US, it was not difficult for Washington to call for a renegotiation of the conditions in 2016. The new version of the agreement (USMCA) was far from being the unilateral imposition that President Trump had threatened during his campaigning (Landler and Rappeport, 2018). At the same time, it is clear that because of the geographical set-up and the clear dominance of the US, trade conditions are largely subordinated to the will and the posturing of the hegemon. The debate on power asymmetries within the EAEU runs along the same theoretical lines and examples that I have just given. Some scholars view Moscow as the regional hegemon that does not intend to relinquish power. For the sceptics, the Kremlin wants just to use the EAEU as a geopolitical tool (Wolczuk, 2021; Busygina and Filippov, 2021). Similarly, it has been argued that Russia lacks both commitment and incentives to stimulating development and activating real redistribution mechanisms (Perović, 2019; Kanet, 2023). According to Bhutia (2019), the enormous asymmetries would encourage the other members to disproportionally 2 According to other scholars, however, this loss would be compensated by a total net gain for the US economy from the regional trade.

212  The Elgar companion to the Eurasian Economic Union target Russia as the main exchange partner. This, in turn, discourages the formation of genuine multilateral relations within the bloc. Moreover, oftentimes, the junior members of the Union are depicted as reluctantly undergoing a forceful process of integration, with Moscow unable to create a legitimacy base that rests on anything other than its prominent geopolitical role (Busygina, 2019; Staeger and Bobocea, 2018). A more favourable portion of scholars argues that Russia’s hegemonic role does not necessarily translate into a lack of commitment of this country towards the EAEU. Russia is the cultural and political centre of the region, which makes Moscow the “playmaker” of the integration process (Lukin, 2014; Pryce, 2013). As a hegemon, Russia is the actor that righteously outlines the political vision for future projects (Lukin and Yakunin, 2018). In a world dominated by the Eurocentric paradigm of integration, the Kremlin tries to devise a more region-appropriate model for the EAEU (Laruelle, 2015). Moreover, Russia would admittedly be the only actor with the capabilities to create enough economic development and a security system able to lead the Eurasian region successfully into the Russian-envisioned multipolar world (Abbas, 2022). Dividing analytical statements from normative assumptions within the relevant literature for this chapter’s topic appears to be a challenging task. One thing is certain, however. Material differences alone cannot explain the impact that power asymmetries have on integration processes. The analysis must include additional variables in order to determine the effect that these asymmetries have on the socialization process within the regional organization.

15.4

DEEP INTEGRATION, STRUCTURAL FACTORS AND EAEU

As we have seen in the review, a nuanced approach is necessary to understand properly the issue concerning the presence of power asymmetries within the EAEU and their impact on future integration attempts. Consequently, I propose an analysis that tackles the problem from a political, legal and economic point of view. Such an approach will be able to frame holistically how different mechanisms intertwine, shedding some light on the issue at hand. 15.4.1 Political Sphere The EAEU is a predominantly autocratic regional organization. Two member states (Armenia and Kyrgyzstan) have experienced some improvement in their democratic governance standards over the last few years (Freedom House, 2021a, 2021b). Their fresh accomplishments have proven, however, to be unstable and easily reversible (e.g. Pannier, 2021; Srbinovski, 2022). At best, they can be described as nations in transit.3 The political character of the EAEU membership is a core aspect of the relationship between power asymmetries and integration. According to the literature, despite having been quite successful, non-democratic regional integration processes are plagued by credible commitment issues. This stems from the tendency of their members to behave more strategically and from a lower domestic cost for free-riding cooperation (Kneuer and Demmelhuber, 2020; Debre, 2021; Lührmann and Lindberg, 2019; Russo and Stoddard, 2018; Garriga, 2009). As I have



3

See Chapter 15 of this Companion.

Power asymmetries and integration process: challenges ahead for the EAEU  213 illustrated in the literature review, a lower perception of legitimacy and a lower level of political commitment hinder integration and make power imbalances much harder to overcome. Russia, as the hegemon of the region, has to face the problem of creating a scenario in which Moscow adheres to the integration project without bullying the other members or bailing out on common regulations. This can be a challenging objective because power and resource asymmetries encourage the hegemon to invest in influencing the rule-making process in its favour, as duly demonstrated by the EU case (and also by the literature, see Girvan, 2007; Andonova and Tuta, 2014; Vachudova, 2013; Obydenkova and Libman, 2014).4 Consequently, it is not surprising that the smaller members have been exercising a high dose of caution, especially in regard to the possibility of the EAEU economic liberalizations spilling over into other policy areas. Given the economic importance of Russia within the group, stable trade relations with Moscow are a far more attractive objective for the junior members than a common political dimension. To make a “community of values” out of the EAEU would mean taking sides in the existing tensions between Russia and Western countries. It goes without saying that this perspective does not necessarily appeal to the smaller members. As a norm, a lack of options leads smaller countries to suffer external conditionality, pushing them deeper and deeper into the sphere of influence of the respective hegemons. It is worth mentioning that there are some institutional instruments that are put in place within the EAEU to try to smooth these problems down. Decision-making within the EAEU is still de facto taken by consensus and the states maintain direct appointment powers on high-level functionaries. Moreover, there is a system of quotas for top-level officials like heads and deputy heads of departments and at the moment Russia maintains only 20% of them despite providing 90% of the budget.5 The smaller members have taken advantage of the decision-making mechanism in order to reject politicized decisions like the one on imposing sanctions on Ukraine in 2016, for instance (Knobel et al., 2019, p. 182). Consensus remains an opt-out mechanism for the weaker members to resist Russia’s attempt to push more strategic and political content in the EAEU decision-making process. This factor, confirms the mistrust that the countries have in getting too close to the Russian political agenda. It does not mean, however, that decision-making outcomes are not affected at all by the disproportionate power asymmetries. The following quote by Staeger and Bobocea (2018, p. 47) in this regard is highly instructive “As one Deputy Minister noted: ‘[one] can assume that some decisions in the [EAEU] Supreme Council have some geostrategic logic behind them’”. It would be naive to believe that Moscow does not try to use its influence to advance its own political agenda (Stronski and Sokolsky, 2020; Dragneva, 2021). The general mistrustful attitude of the smaller members towards the hegemon is aggravated by the fact that in the past Moscow has hardly shied away from applying coercive measures against non-compliant actors (Busygina, 2018, p. 33). The recent Ukrainian invasion has only consolidated further Moscow’s image as a hard-power “leaning” actor. Consequently, if coercion is perceived by the hegemon as a valid alternative to political legitimacy, further institutional binds will not prevent pressure. On the contrary, they will probably create new channels for such pressure to be exercised.



4 5

This topic is also discussed in Chapter 2 of this Companion. On the formal design of the EAEU institutions see Chapter 9 of this Companion.

214  The Elgar companion to the Eurasian Economic Union Such scepticism is probably best seen in Kazakhstan’s attitude, which increasingly looks like an emerging veto player within the institutional dynamics of the EAEU. Astana has already stated in the past its preference to keep the EAEU integration exclusively on an economical level (Libman and Vinokurov, 2018). In 2021 the country, in the midst of the EU– Belarus migration stand-off, explicitly denied the existence of any negotiation for a “common response” of the EAEU to the Western sanctions against Belarus (Kazakhstan Foreign Ministry, 2021; Reuters, 2021). In the wake of the Ukrainian invasion, Kazakhstan has clearly distanced itself from Moscow’s decisions (Gotev, 2022) sending reassurance signals to the European Union and the West (Gorris, 2022). The country, however, has softened its stand since then. While Astana has shown compliance with its basic duties to respect the sanctions. Some goods are still rerouted to Russia through “parallel exporting” and cash transfer is still abundantly possible through the payment of little to no fees. Armenia, on the other hand, has recently seen a dramatic change in political relations with Russia. The end of the Nagorno-Karabakh conflict has de facto alienated the country from Moscow. Already before the end of the conflict, Yerevan was the only member of the EAEU with a comprehensive agreement with the EU on trade. At this point, Armenia is seeking a political realignment with the West. Until the end of the Ukrainian war, however, it remains uncertain to what extent the government will manage to readjust its geopolitical position. It is safe to say that both political and security cooperation in the case of Armenia and Kazakhstan did not translate into a deeper unity within the Eurasian group (e.g. Cutler, 2022; Goble, 2022). Even Kyrgyzstan has confirmed over the last couple of years to have a generally cautious stand towards Russia, limiting any hints of explicit support for Moscow’s geopolitical agenda (RFE/RL, 2022). It seems, though, that at this point Bishkek is following Kazakhstan’s steps on the issue of Ukrainian sanctions: formal compliance without going the extra mile to avoid critical developments with Russia. Significant also is the fact that none of these countries has sided with Russia within the UNGA debate on the Ukraine invasion, abstaining on Res/2623/2022 which condemned Russian actions against Ukraine. Also, for the time being, none of these states has given recognition to the annexation of Donetsk and Luhansk to Russia. The only case worth analysing with a bit more care is, of course, the position of Belarus. The country is the only member that sided with Russia, voting against Res/2623. Over the years Minsk had carried on a balancing policy very similar to the other members (Astapenia, 2015; Libman and Vinokurov, 2018; Marin, 2020). This balance was somewhat challenged by the EU sanctions in 2021 against Belarus bringing the country to lean more heavily on Moscow as a political partner (Lukashenko made ambiguous statements, which could have been interpreted as recognition of the Russian annexation of Crimea; Balmforth, 2021; Makhovsky, 2016). Minsk, however, has not presented itself as a direct military ally of Russia during the 2022 invasion of Ukraine (Aljazeera, 2022). It is very likely that Lukashenko’s regime was not expecting the Ukrainian war to be so protracted. A swift Russian victory would have given Minsk the opportunity to pledge allegiance to Moscow while officially working on a diplomatic resolution to the conflict in front of the international community. Sakwa has argued the EAEU reflects the aspiration of Eurasian continentalism with the ambitious objective to create a Eurasian power pole in a multipolar world (Sakwa, 2016). This, however, is impossible to achieve without a credible commitment and inner political unity.

Power asymmetries and integration process: challenges ahead for the EAEU  215 This can also explain why the relatively low level of trade interdependence among EAEU countries is perceived by many observers as puzzling.6 The existing strategic and economic benefits that the members get in participating in the EAEU project are unquestionably strong enough to hold the group together. However, given their pragmatic approach, the junior partners do not have for now a big enough incentive for making a deeper political commitment to integration (Dragneva and Wolczuk, 2017). This dichotomy became even more aggravated after the 2022 war. It is unlikely that a stronger political unit will be achieved within the group as long as the bulk of trade interests for the membership rest somewhere else (Patalakh, 2017; Korosteleva and Paikin, 2020). Fearing excessive dependence on Russia, Eurasian countries emphasize the development of trade relations with other partners, which leads to a low level of within-bloc trade. Interdependency is not the only way to achieve integration (Börzel and Risse, 2019) but the fundamental mistrust within the membership and Russia’s aggressive posture clearly represent an obstacle for the EAEU to the expansion and the deepening of the original project. It is out of doubt that the Eurasian countries are indeed able to rally around common policies. The real question is under what conditions they will be able to go further into the integration process (Börzel, 2016; Börzel and Risse, 2019; Obydenkova and Schmitter, 2020) and whether it will be possible at all after the war. 15.4.2 Economic Governance and Crisis Management Currently, with regard to the economic governance of the EAEU integration, a big portion of the literature discusses how despite the establishment of a de jure internal market the members of the Union have been displaying occasionally protectionist and opportunistic tendencies, which have undermined the commitment to the liberalization process (Dragneva, 2017, 2021; Vakulchuk and Knobel, 2018; Dragneva and Wolczuk, 2017; Ivanova and Latyshov, 2020; Spartak, 2021). In other words, the members still maintain a considerable distrustful attitude towards one another, which gives market relations an overly strategic connotation. Two further factors should be taken into account. First, within the Eurasian membership state-directed economy is usually perceived as a power tool to apply in order to achieve policy goals (e.g. Lane and Myant, 2007; Sabatini and Berg, 2021; Åslund, 2019). This is especially true for Russia (Libman, 2018, 2020; Libman et al., 2022) where business is oftentimes an instrument of strategic interests. Second, there is what Obydenkova and Libman call “limiting factors of integration” (Obydenkova and Libman, 2019, pp. 134–139; Libman and Obydenkova, 2020). This idea describes a situation in which the presence of a high level of asset specificity makes the control of that specific asset an effective leverage to influence the national political agenda (e.g. Belarus’s dependency on Russia’s energy supplies). According to the authors, a strong presence of limiting factors can be detected within the EAEU context, and this has a considerable impact on the speed of the integration process. The presence of strategic dynamics, in connection with the presence of large power gaps, creates attrition in achieving deeper levels of integration. The strategic risk for the smaller partners is that the Kremlin would use economic liberalization and further economic integration as a way to retain control of the near-abroad (Korteweg, 2018; Pleines, 2019). For 6 In the EU, intra-regional exports occupy a greater share of EU total exports (64%,) whereas in the EAEU it reaches 11% only (Mukhametdinov, 2020, p. 46).

216  The Elgar companion to the Eurasian Economic Union this reason, Mukhametdinov (2020, pp. 67–69) argues that the smaller members perceive liberalization as a matter concerning their national interest and political independence. Once again, the strategic nature of members’ relations makes power asymmetries a hurdle for further internal unity. This lack of internal unity can be seen reflected in the crisis management approach the EAEU has adopted over the last years. The EAEU region has experienced a surge of integration efforts and rhetoric in times of general and shared economic difficulties (Vinokurov and Libman, 2014, 2018). When these crises assume a political factor, however, the members are quick to keep their distance from stronger or extraordinary commitments to face the issue as a unitary bloc. There are a few examples that can be discussed in this regard. One of the earliest is the 2014 Ukraine crisis (Malashenko, 2014). In the aftermath of the crisis, the junior members not only remained low-key on the recognition of the annexation (with the exception of Kyrgyzstan) but they did not even follow through with the economic retaliations imposed by Russia on the Western countries (Sordi and Libman, 2020). By the same token, two years later, in 2016 the partners refused retaliatory measures against Ukraine. Neither did they come together in 2020/21 in support of Belarus’s troubled economy, during its migration-related standoff against the EU. The management of the COVID pandemic by the EAEU, instead, has been received with mixed opinions by experts and analysts. The immediate reaction to the virus outbreak undoubtedly put some strain on the unity of the Union. The first phase of the pandemic saw a reaction oriented towards national-level solutions that implied the establishment of bans, export quotas and a general disruption of exchange flows (Dragneva and Wolczuk, 2022; Najibullah, 2022; Eurasianet, 2020). Subsequently, however, the Council created a number of useful common initiatives that prioritized exchange and cooperation among the member states over third countries (e.g. the green corridor). Russia, furthermore, delivered 900,000 COVID tests and other protective equipment to the members (Nikitina and Arapova, 2022). All in all, the COVID crisis has demonstrated what Vinokurov and Libman predicted in their 2014 paper on crisis management within the Union: the countries have managed to bundle together in a time of common economic crisis trying to keep the existing economic ties intact (Vinokurov and Libman, 2014). Finally, yet importantly, there is the 2022 Russian invasion of Ukraine. There is no doubt that the war has been disruptive as regards the internal balances of the Union. While the crisis is still unfolding, the big question is to what extent the EAEU will help Russia circumvent sanctions.7 Single individuals and businesses sought relocation from Russia and Belarus to Kazakhstan and Armenia after the beginning of the war (Kumenov, 2021, 2022; Lillis, 2022). Pressure for norm compliance with Western sanctions is affecting the relationship of the junior members with Russia (Hess, 2022). Given that all the junior members have considerable trade interests with non-EAEU countries, this surely worked so far as an incentive for not getting sucked up in the geopolitical confrontation over Ukraine. Despite Kazakhstan and Armenian declarations, taking a considerable distance from Russia’s geopolitical agenda, these talks yet have to translate into an institutional change which could redefine the regional equilibria (Gotev, 2022; RFE/RL’s Kazakh Service, 2022: Kumenov, 2022).



7

See also Chapter 16 of this Companion.

Power asymmetries and integration process: challenges ahead for the EAEU  217 Overall, Russia has not been the best reliable partner over the last years for the EAEU partners. The sanctions imposed on Russia after the 2014 Crimea crisis have caused considerable losses to central Asian countries (Schenkkan, 2015). Again, in 2022 the short-lived unilateral bans on grains and sugar in connection with the Ruble instability at the beginning of the 2022 Ukrainian crisis have created great worries among the smaller partners. Finally, Moscow repeatedly interrupted oil flows from Kazakhstan in 2022 in response to the lack of support Astana had displayed during its “special operation”. All of this confirms what Dragneva and Wolczuk (2017) hinted at by saying that the prominence of the geopolitical character of the EAEU was slowing down the economic process of integration. No one wants to get tied up to a local hegemon that can drag their economic stability into turmoil overnight. All the partners have displayed in the past some form of dependency on Moscow both as an economic partner and as a security provider. For this reason, even in the worst-case scenario, they will not be able to disenfranchise their economic governance from Russia so easily. At the same time, active resistance is exercised against Russia’s attempts to push the political boundaries of the Union. 15.4.3 Union Law and the Union Institutional Framework: Between Doubts and Best Practices The establishment of the EAEU institutional framework was met with a certain scepticism by the scholars of regional law at the time (Karliuk, 2017, 2019; Kembayev, 2016; Burlyuk and Axyonova, 2018; Molchanov, 2019). The greatest concern in this regard was the direct applicability and the supremacy of the EAEU’s law within national legal systems. Formally, direct applicability is granted by the treaty (art. 52.2 and Annex I art. 13). Scholars, however, emphasized that the relations between the Union and domestic law left a large space of plausible deniability for the members (Petrov and Kalinichenko, 2016). This plausible deniability acquires a particular significance in the case of Russia as the hegemon of the group. Russia’s Constitution provides no instruction for explicit recognition of the supremacy of EAEU law and different authors have expressed concern that, under the current situation, the incorporation of EAEU law within the Russian legal system could suffer from a general level of ambiguity and uncertainty (Karliuk, 2017; Malko and Terekhov, 2018). Most importantly, the direct applicability of international law within the Russian system has suffered a significant setback after the 2020 constitutional reform (e.g. Ioffe, 2020; Belov, 2021; Fisher, 2023). At the centre of the controversy, there is the new formulation of art. 79, which expands de jure the ground on which the Constitutional Court can resist the application of legal instruments coming from international bodies. These concerns were aggravated by the fact that the EAEU Court cannot make use of an institution akin to the preliminary ruling of the ECJ. Commentators have expressed the fear that the lack of a preliminary ruling-like procedure in front of the EAEU Court introduces the risk of restricting the possibility of direct centralized control of the Union’s law evolution and implementation (Karliuk, 2019; Kembayev, 2016; Karliuk, 2017). Although these questions still remain legitimate concerns, the recent practice of the Court of the EAEU has partially brought some reassurance and has shown the goodwill of the institution to have a primary role within the institutional life of the organization. The “Vertical Agreements” case in 2017 has supposedly consolidated the direct applicability of EAEU law within national legal systems. The principle was not spelt out in detail in this instance and it

218  The Elgar companion to the Eurasian Economic Union has been later taken up again in “Opinion on Professional Athletes” and the “downsizing” cases. On these occasions, the Court was presented with a conflict between the national law of the Russian Federation and the primary law of the Union. In both cases, the Court opted for re-establishing the supremacy and direct applicability of the law of the Union. The quality and the extent of the formulation of these principles remain still a matter of debate among scholars (Aseeva and Górski, 2021; Pirker and Entin, 2019).8 As per the lack of preliminary ruling, some scholars have pointed out that although the advisory opinions are not binding, they are an apt substitution. This, however, begs the question of why not have a preliminary ruling in the first place if the Court needs to invent supplementary competence to make sure it can carry on its function properly. In the past, Vinokurov (2018, p. 56) described the situation by recalling the stage that the European Union needed to go through after the “Van Gend en Loos” and “Costa vs ENEL” decisions. The parallels are surely there; however, there are some issues about the recent trends within the EAEU that still need to be taken into account to have a critical view of the topic. The nature and scope of legal protection remain anchored in the existence of an economic and business activity and they do not protect the individual as such (which arguably has been a discussion that happened within the EU as well). This reflects the spirit of the Union to keep relations exclusively on the economic level (Pimenova, 2019). The EU overcame this stage by moving forward towards a more comprehensive protection of individual rights in front of the Court and it will be interesting to see how the EAEU solves this impasse. Second, the consolidation of this practice needs some time to stratify. Single opinions do not mean that this will be accepted practice in the future. The dialogue between the national and EAEU judiciaries could bring new elements to the nature and scope of the EAEU law. This is especially in light of the past attitude of Russian courts who established clear limits in relation to individual rights (Pirker and Entin, 2019). This position is also reminiscent of “Costa vs ENEL”: the nature of the division of competencies will depend on the evolution of the Court dialogue over the next few years. Finally, the role and the scope of the Court itself needs still to be determined within the EAEU. In the EU, the ECJ has been one of the main engines for deeper integration. It is somehow awkward to think that the supranational development of the EAEU will be delegated by the members to the activism of the Court. This, taking also into account the following two factors. First, the definition of the competencies of the Court remains restrictive in terms of judiciary activism (paragraph 102 of the Court’s Statute). Second, member states do not see the Union as a tool for limiting their sovereign autonomy but as one that would be aimed at reinforcing it (Myasnikovich and Kovalev, 2022). This plays into the second problem that is usually discussed within the literature in regard to the EAEU: its supranational character. According to Risse (2015, p. 1), the institutional design of the EAEU “resembles the EU to a large extent with one exception: [it] does not contain provisions of supra-national institutions, it remains intergovernmental”. It is commonly acknowledged (Dragneva and Wolczuk, 2017; Pimenova, 2019) that there is a strong hierarchy built into the decision-making structure of the EAEU in which the Commission remains strongly subordinated to the Supreme Council and the Intergovernmental Council. Since the



8

See also Chapter 9 of this Companion.

Power asymmetries and integration process: challenges ahead for the EAEU  219 Commission is the only organ with supranational features, this would curtail the autonomy and independence of the organization vis-à-vis the will of the single members. Although most of the Commission’s activities are in line with general international good practices there are a few elements that are still limiting the supranational nature of the organ. As stated by a recent OECD review on the matter, the Commission’s power is still limited in terms of competencies and actions. The functions of the organ can be exercised in fact only in relation to a transboundary market situation and competencies requirements are quite onerous in relation to the exercise of its functions (OECD, 2021, p. 169). Notably, unlike the Commission of the European Union, the EAEU Commission has no power to bring non-compliant states in front of the Court. This lowers the level of effectiveness of the control over the due implementation of EAEU law. Dispute settlement procedures (art. 112 and art. 39 Annex II EAEU Treaty) give to the members a heavy responsibility in regard to the application of the treaty. However, as seen from past experience in international politics (e.g. both arts. 258 and 259 TFEU and UNICCPR), states rarely start direct procedures against fellow states. Further complicating the issue, it is important to note that the enforcement mechanism for the decisions of the Court against members remains weak (paragraph 114 of the Court’s Statute), mostly because it requires the intervention of the Supreme Council, which has to reach a unanimity vote on the matter. As I have already argued, the presence of a priori power asymmetries does not necessarily constitute a problem per se for deep integration, and there are clearly some encouraging results coming from the activity of the Court but it seems that the members want to maintain an “emergency-break” approach to decision-making. Large power asymmetries, just like in the cases of the SADC and SACU can favour unilateral malicious behaviour from the hegemon. On the contrary stable and cohesive communities need a high level of predictability of outcomes (achieved through stable enforcement of common norms) and procedural legitimacy for decision-making (achieved through a credible supranational framework). Effective institutions in a regional organization are meant to create exactly this, enabling consequently further common projects and deeper interdependencies. I want to stress that, in light of the literature reviewed, legitimacy and predictability can be, in principle, not exclusively democratic prerogatives. A (mostly) authoritarian group like the EAEU could achieve, in theory, normative stability within its group basing it on credible enforcement mechanisms and stable commitments to common institutions. It remains to be seen, however, how much the project will remain a priority for Moscow and how far the other members feel it tolerable to deepen legal and institutional relations with the Kremlin.

15.5

CONCLUSION AND POSSIBLE FUTURE SCENARIOS

This chapter has investigated what kind of problems the presence of strong power asymmetries could cause within the context of future integration efforts of the EAEU. Power asymmetries do not per se constitute an obstacle to integration. However, when taken together with the predominantly autocratic nature of the group, the posturing of the members and the past behaviour of the hegemon, power imbalances make achieving a deeper integration more challenging. Currently, the future success of the EAEU massively depends upon how much Russia is able to provide concrete advantages for the junior members.

220  The Elgar companion to the Eurasian Economic Union In a time of great instability like the one we have experienced since 2022, it is impossible to draw fixed conclusions on our topic of analysis. I can outline, however, some possible scenarios that can result from both short- and long-term trends in the development of the EAEU integration process (Ikenberry, 2001).9 Mostly the same: the COVID and the Ukrainian crises have put great stress on the EAEU. The result, however, has not been disruptive at an institutional level. On the contrary, the EAEU has been muddling through remarkably well so far. The existing structures have reached a certain level of efficiency and under this first scenario, it is reasonable to expect that the main objective of the bloc would be to keep resisting Russian attempts to draw the EAEU within its strategic agenda. This would make “avoiding any form of politicization” the political mantra of the smaller members. After all, this was the original idea for the formation of the Union according to then-president Nazarbayev. New political balances: transformational dynamics can take place not only at an institutional level. A change in power relations within the bloc would also be able to reshape the trajectory of the Union. Russia has already demonstrated itself to be way less effective in manipulating the EAEU for its strategic goals than anticipated by many Western scholars. This means that the rise of Kazakhstan as a credible veto subject within the EAEU could transform the bloc into a more credible multilateral organization and open the way to moderate reforms, especially after the end of the Ukrainian war. This would mean that Russia will consolidate the strategic importance of the EAEU in its security vision but at the same time will try to preserve its hegemonic position by controlling future integration efforts. As Moscow puts more importance on the EAEU, though, this will give higher bargaining power to the junior members since the costs of a successful EAEU will deeply depend on their compliance. Such dynamics will probably render the future of the integration process less Moscow-driven. Russia’s new inputs for reform: finally, there is the possibility that Moscow, reacting to the diversification strategy of the junior members, will step up the commitment to institutional reforms being more prone to giving up its hegemonic privileges. Under this scenario, Russia will probably try to match the expectations that the junior members have in maintaining their multilateral policy with other countries. In this case, more significant reforms will gain momentum such as a single energy market and monetary policy coordination. Russia’s advantages would be to maintain its partners’ commitment to the future of the project while trying to make the Union a more significant element of the Kremlin’s strategy. On the other hand, Moscow would have to institutionalize significant portions of its hegemonic position bearing the burden (as the hegemon) of the success of the new institutional framework. Whatever future developments will look like, the EAEU case deserves greater attention from both researchers and practitioners alike. I am sure that its interesting and unique nature is destined to bring significant changes to our idea of regionalism, integration and the role that power plays within these phenomena.

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9

See also Conclusion to this Companion.

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16. EAEU and economic sanctions Alexander Libman

16.1 INTRODUCTION1 Economic coercion has played a crucial role in Eurasia for the last 30 years. Russia has actively used sanctions against its neighboring states in a variety of cases as a tool of political pressure to achieve its foreign policy goals (Drezner, 1999), and continues to do so as of today (though these sanctions are typically framed as phytosanitary measures, see Svoboda, 2021). The annexation of Crimea and the war in Donbas were the cause of the introduction of Western economic sanctions against Russia.2 As a response, Russia introduced its own counter-sanctions banning import of food from the EU, the US and several other countries. The war in Ukraine in 2022 led to a massive increase of sanctions against Russia and Belarus on the side of the West, along with decisions of numerous Western companies to leave the Russian market. Finally, the EU and the US for decades have used varying sanctions against Belarus, focusing on human rights violations and authoritarian political practices in this country. The existence of these mutual sanctions has always been a challenge to the EAEU, which the organization has had to face since its establishment in 2015. There are three aspects to this challenge. The first is in the nature of the EAEU. As an organization focusing in particular on promoting free trade and based on market economy principles,3 it obviously faces difficulties when individual countries introduce measures constraining trade flows due to political reasons. Under these conditions either the organization has to abandon its objective of promoting free markets, or the existence of a free trade regime will alter the effect of sanctions in an unpredictable way, leading to tensions among member countries. The fact that the EAEU has a relatively high level of implementation of commitments of its members contributes to the challenge: a purely rhetorical organization would be less affected. The second challenge is caused by the economic slowdown inevitably associated with the introduction of sanctions, which influences the demand for regionalism on the side of EAEU member states. The third challenge became particularly pronounced with the most recent sanctions wave against Russia in 2022, which affected the access of Russia to the global payment infrastructure (SWIFT sanctions). This infrastructure was important for trade in the EAEU as well and, without a doubt, influences the functioning of this organization and may require it to deal with new tasks and challenges. The effect of sanctions on economic regionalism is, somewhat surprisingly, an almost entirely unexplored topic in comparative regionalism research. In fact, there exists a literature The research was funded by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation), project number 444058835. 2 Some Western sanctions from the Soviet era were legally in force throughout the post-Soviet period: the Jackson-Vanik amendment from 1974 was officially repealed only in 2012. 3 See Chapter 4 in this Companion. 1

227

228  The Elgar companion to the Eurasian Economic Union about regional organizations imposing sanctions on their members or other countries (Portela, 2010; Hellquist, 2014; Borzyskowski and Portela, 2016; Palestini, 2021; Giumelli et al., 2021). The focus of these studies is on the ability of regional organizations to maintain a coordinated position on sanctions and on the effectiveness of these measures. However, we know very little about what happens to regional organizations if they themselves become targets of sanctions. Key examples of international sanctions in the last decades (Yugoslavia, North Korea, Iraq, Iran, Myanmar or Zimbabwe) were not parts of advanced regional organizations (they participated in purely symbolic ones at best, like the Economic Cooperation Organization). There are only very few exceptions: South Africa (which had the key role in the South African Customs Union) and Belarus (with intensive economic ties to Russia, also within the framework of the Union State of Russia and Belarus). In both cases, the existence of regional integration mechanisms appears to have lessened the pressure of sanctions (e.g., Gibb and Treasure, 2011, 2014, for South Africa); however, given the very small number of examples, expanding the universe of cases appears to be prudent. This makes the case of sanctions of the EU and the US against Russia and their effect on the EAEU a particularly interesting research topic, not only from the practical, but also from the scholarly perspective. This chapter will review how the sanctions war between Russia and the EU/US affected the functioning of the EAEU in the last decade. I will start by deriving a number of predictions about possible effects of sanctions on the EAEU. In the next step, I will proceed to presenting the empirical evidence. It will be structured chronologically, starting with the sanctions following the annexation of Crimea and war in Donbas (as well as Russian response to those), and continues by looking at the more recent wave of much stronger sanctions against Russia imposed in 2022.4 In the conclusion, I will highlight possible future scenarios for the EAEU based on the potential evolution of the sanctions regime.

16.2

SANCTIONS AND REGIONALISM: POSSIBLE EFFECTS

How should external sanctions imposed against one of the members or sanctions imposed by one of the members on another, affect the functioning of the regional economic integration project? Somewhat simplified, it is possible to identify three main effects. First, by leading to an economic slowdown (or even crisis), sanctions reduce the interest of the member states in maintaining the regional integration project. Markets of the targeted country become less attractive; international trade and investments within the organization become less predictable, riskier and heavily influenced by political factors. As a result, the potential gains from regionalism are likely to go down.5 Generally speaking, the relation between regionalism and economic crises is ambiguous (Vinokurov and Libman, 2014); it is possible that economic slowdown creates additional impetus for countries to come together and to intensify their cooperation. In case of sanctions, however, this effect is unlikely to dominate as long as the latter are imposed only against individual countries: in this case, the distribution of costs and risks of sanctions is asymmetric and, as long as economic logic dominates over the political 4 Given the ongoing nature of the war in Ukraine, one has to point out that the conclusions of this chapter are going to be preliminary; they will reflect the development as of April 2023. 5 Even more, countries could become wary of possible transmission of crisis from the sanctioned countries to their economies in case of excessive dependence. See e.g., Bayramov et al. (2020).

EAEU and economic sanctions  229 one, countries, which were not targeted by sanctions, should refrain from cooperating with the sanctioned ones.6 In Eurasia, this creates a particular problem: the EU and the US sanctions mostly focus on Russia, the biggest country of the EAEU, which also, in a sense, brings the organization together – without Russia, EAEU states (with the possible exception of the Kazakhstan–Kyrgyzstan dyad) have little in common.7 As a result, sanctions should have a particularly profound effect on the interest of smaller countries in the EAEU. Second, as long as the regional organization is focusing on market liberalization, sanctions can also increase the interest of countries and companies to regionalism: regional organization can become an effective tool of evading sanctions through rerouting the trade flows. Trade between countries imposing sanctions and countries targeted by sanctions can be organized through the non-sanctioned states. For example, Swaziland was an important “sanctions-breaker” during the era of apartheid sanctions against South Africa, used by larger multinational companies as well (Booth, 1989). The effect runs against the first one; which effect will ultimately prevail depends, on the one hand, on the extent of economic slowdown (it is less attractive to overcome barriers to countries, which experience economic stagnation and crisis), and on the other hand, on the design of the sanctions regime. The ability of a regional organization to support the evasion of sanctions could also become a source of tension within the organization or between its members and external countries. Third, regional organizations could become important for sanctioned countries if they support concerted effort aiming at overcoming the sanctions pressure. It could be associated with developing joint programs of economic cooperation or a regional payment system, as well as supporting each other in international negotiations. Whether the regional organization manages to achieve this goal depends on the depth of integration though, which should be sufficient, as well as on the extent of political and redistribution conflicts triggered by other effects of sanctions presented above. The effects also depend upon the specific design of sanctions and the potential of the regional organization to contribute to overcoming them at all. In this case, regional organizations’ focus should in fact be not on market liberalization but on other forms of cooperation, e.g., implementation of joint investment projects or supporting centralized trade transactions. COMECON, for example, provided unprecedently favorable trade conditions to Cuba after it faced economic blockade from the US (Pollitt, 2004); access to cheap Venezuelan oil played a similar role for Cuba during the era of success of ALBA (Vinokurov and Libman, 2017). For other types of sanctions, “friendly” members of a regional organization may lack resources and capacity to support the sanctioned country. For the case of the EAEU, there seems to be particularly strong empirical evidence for the first two channels of sanctions effects. Since the introduction of the Western sanctions in 2014–2015, the Russian economy has been in a state of long-term stagnation. In 2022, contrary to the expectations, the decline of the Russian economy as a consequence of economic sanctions turned out to be relatively small, at least in the short run; in the long run, stronger impact of sanctions is to be expected (Rogov, 2023). Identifying the specific causal effect of sanctions-driven economic slowdown as opposed to other factors on the progress of the EAEU (e.g., declining trust across members of the organization due to Russia’s aggressive foreign 6 Russia itself followed this logic in the past: thus Iran was for many years refused admission to the Shanghai Cooperation Organisation because of the UN sanctions against this country (https://​www​ .reuters​.com/​article/​idINIndia​-48714020100522). 7 See Chapter 15 in this Companion.

230  The Elgar companion to the Eurasian Economic Union policy, see Libman, 2022) is hardly possible, given the lack of counterfactual evidence.8 The second channel (evading sanctions through the EAEU) has been subject to extensive debate and speculation over the last decade; I will summarize the state of this debate in what follows. Finally, as for the third channel, there is a lot of discussion about the potential of the EAEU to assist countries targeted by sanctions; so far, however, it is mostly located in the realm of political rhetoric.

16.3

SANCTIONS AND THE EAEU

16.3.1 Crimean Crisis: EAEU and Russian Counter-Sanctions The sanctions imposed against Russia after the Crimean crisis did not target the EAEU and its institutions. The trade constraints introduced by the European countries and the US were relatively marginal. On the contrary, during this period, many voices in the EU (and especially in Germany) saw a dialogue between the EAEU and the EU as a means of maintaining relations with Russia in spite of political differences (Libman, 2015a). The main effect of sanctions was associated with the already described economic stagnation of the Russian economy and risks of transmission of economic crisis to other post-Soviet countries (Libman, 2015b). This was likely to constrain the interest of the Eurasian states in the EAEU (although, as mentioned, one lacks a convincing counterfactual). A much bigger challenge for the EAEU turned out to be Russian counter-sanctions, with which Russia reacted on both the EU and the US sanction regime and Ukraine signing an association agreement with the EU. Specifically, two sets of measures have to be mentioned. First, Russia, after the refusal of two other members of the Customs Union (Belarus and Kazakhstan) to sanction Ukraine, unilaterally introduced sanctions against Ukraine citing threats to its economy because of a deep and comprehensive free trade agreement between Ukraine and the EU. From 2016 on, Russia introduced numerous restrictions on the import of goods from Ukraine; in 2018, Russia introduced sanctions against individuals and companies from Ukraine.9 Furthermore, in 2014 Russia banned food imports from the EU, the US and a number of other countries. Again, the measure of the Russian government was not supported by any other member of the EAEU. Russian counter-sanctions led to a paradoxical situation: it was still legal to import food from the EU or goods from Ukraine to smaller countries of the EAEU like Belarus and Kazakhstan; while it remained illegal to further import goods to Russia, open borders within the Union made the enforcement of the Russian ban very difficult. As a result, for companies from smaller EAEU countries, it became attractive to use the position of the intermediaries, supplying sanctioned goods to the Russian market. Such a situation was not unusual for post-Soviet Eurasia and has been observed there in the past: the problems of access to Russian markets through Belarus existed already in the 1990s, during the first attempt at creating a customs union, and were among the main reasons leading to its demise (Vinokurov and Libman, 2014); similarly, Kyrgyzstan for decades served as an entrepôt for Chinese consumer This is the fundamental problem with evaluating economic and political effects of sanctions as well (Baldwin, 1999). 9 See https://​www​.vedomosti​.ru/​economics/​articles/​2018/​11/​01/​785455​-sanktsii​-ukraini. 8

EAEU and economic sanctions  231 goods to Central Asia and the post-Soviet countries due to lax implementation of customs rules (Kaminski and Raballand, 2009). In case of the Russian counter-sanctions, there was a crucial difference though: first, the highly liberal trade regime in the EAEU facilitated the rerouting of trade flows, and second, Russian sanctions made this rerouting attractive in the first place. Although the government of Belarus, for example, rejected any rerouting of food imports from the EU to Russia through its territory, there exists abundant anecdotal and quantitative evidence that this rerouting actually took place through both Belarus (Vieira, 2017; Tyazhelnikov et al., 2022) and Kazakhstan (Aituar, 2021). Yeliseyeu (2017), for instance, estimates the value of re-exports through Belarus to have reached 2.7 billion USD in the period between 2014 and 2017. Lukaszuk (2021) suggests that smuggling accounted for about 8.5% of the total reduction of trade due to sanctions; half of it was associated with rerouting trade through Kazakhstan and Belarus. In order to deal with possible sanctions-busting, Russia introduced additional restrictions on transit from sanctioned countries to the EAEU members (in particular, Kazakhstan) through Russia’s territory: unsurprisingly, it contributed to the tensions between the EAEU members.10 Ultimately, however, Russia accepted EAEU countries’ unwillingness to join Russian sanctions or even act as sanctions-breakers (Garashchuk et al., 2023). Ironically, responding to the EU sanctions after the suppression of mass protests in 2020, Belarus also introduced its own counter-sanctions against EU imports. In this case, the observers expected the sanctions-busting through the Russian territory to be less likely due to the much smaller size of the Belarusian market.11 The war in Ukraine, in any case, soon made the topic irrelevant. As a final remark, it is important to notice that rerouting of trade flows through smaller countries of the EAEU, while contradicting the goals of the Russian leadership, did not necessarily cause a problem in terms of the overall effects for the Russian economy. Russian counter-sanctions were introduced at the costs of Russian consumers and served primarily political goals.12 Thus, in a sense, the EAEU reduced the negative impact of political decisions of the Russian leadership on the Russian population. Since the first round of sanctions introduced by the EU and the US, there has been regular discussion about the possibility of developing a consolidated position of the EAEU towards sanctions. This discussion was driven, on the one hand, by regularly escalating tensions between the West and Russia (making new sanctions likely), and on the other hand, by sanctions against Russia becoming the topic of domestic politics of the US, making the introduction of new sanctions more likely. At the same time, the EAEU did not undertake any specific measures to develop such a coordinated response. Thus, the statement of the then prime minister of Russia Dmitry Medvedev suggesting that “collective steps” at the EAEU level could be important as a reaction to escalating trade wars in the global economy did not lead to any other consequences than a request to the EAEC to analyze the international experience of such collective responses.13 Calls of the Russian government towards the EAEU countries to jointly 10 See https://​www​.bbc​.com/​ukrainian/​ukraine​_in​_russian/​2016/​01/​160106​_ru​_s​_ukraine​_trade​ _kazakhstan​_russia. 11 See https://​www​.dw​.com/​ru/​jembargo​-naiznanku​-poedet​-li​-hamon​-iz​-rossii​-v​-belarus/​a​ -60084544. 12 Although there was a component of these sanctions associated with the support of Russian agriculture. 13 See https://​www​.ritmeurasia​.org/​news​-​-2019​-07​-03​-​-sposoben​-li​-eaes​-otvechat​-sankcijami​-na​ -sankcii​-43595.

232  The Elgar companion to the Eurasian Economic Union respond to possible sanctions, as they were expressed by an official of the Russian foreign ministry in 2021, were vehemently rejected by Kazakhstan.14 While the EAEC took a more differentiated stance, claiming that the discussion of a consolidated response was at least legitimate,15 and several months later even claimed to have suggested a collective mechanism of protecting economic interests of its members facing sanctions to the member states,16 no practical steps followed. This is not surprising: designing a collective mechanism of response to sanctions would, first, increase the level of decision-making centralization in the EAEU (which was always rejected by smaller states) and second, put smaller states in a position where they would be forced to get involved in Russia’s conflicts with the West – again, an unacceptable scenario for a country like Kazakhstan. 16.3.2 The War in Ukraine: Sanctions-Breaking Through the EAEU? The new wave of sanctions imposed by the EU and the US, as well as their allies, against Russia (and Belarus) in 2022–2023, is much more severe than the previous sanctions wave. Not only is the list of sanctioned goods, services and entities much larger: there is a qualitative jump in the intensity of sanctions. First, the EU and the US did not hesitate to use a broader array of financial sanctions against Russia, including sanctioning key Russian banks, excluding major Russian financial institutions from the SWIFT system and freezing assets of the Russian Central Bank. Second, some of the sanctions apply to the Russian energy exports banning import of oil and coal to the EU and introducing a price cap on seaborne crude oil. As in case of the 2014–2015 sanctions, EAEU institutions as such, as well as EAEU members other than Russia and Belarus are not targeted by sanctions.17 Still, in addition to the already mentioned economic slowdown in Russia, some additional effects of sanctions can be identified. First, the expulsion of Russian banks from the international payment systems and limits on their ability to operate USD and EUR payments has impact on trade and remittances in the EAEU. While there are some alternatives for the payment systems (for example, the Russian Central Bank’s SPFS, an analogue to SWIFT, which several foreign banks participate in,18 or the card payment system Mir, which is accessible in some of the post-Soviet countries), all of them have limited reach. Transactions between the EAEU countries prior to the war mostly happened in currencies like USD and EUR, which sanctioned Russian banks are now unable to use. As a result, the main rationale of the EAEU (fostering trade, investments and migration by removing economic borders between countries) became more difficult to achieve. Several banks from the EAEU countries, which performed their operations through

14 See https://​ russian​ .eurasianet​ .org/​ казахстан​ -отказался​ -от​ -предложения​ -россии​ -дать​ -консолидированный​-ответ​-на​-санкции​-запада. 15 See https://​lsm​.kz/​otvet​-zapadu​-v​-eek​-prokommentirovali. 16 See https://​www​.ng​.ru/​cis/​2021​-09​-30/​1​_8266​_sanctions​.html. 17 The EU has frozen some of the funds of the Eurasian Development Bank; in 2023, the bank’s shareholder structure was rebalanced (with the share of Russia decreasing and that of Armenia, Kazakhstan, Kyrgyzstan and Tajikistan increasing), after which the EDB applied for the fund to be unfrozen (https://​inbusiness​.kz/​ru/​news/​es​-v​-ramkah​-antirossijskih​-sankcij​-zamorozil​-sredstva​-eabr). 18 The list of these banks is not publicly disclosed, see https://​ria​.ru/​20220629/​swift​-1798953136​ .html.

EAEU and economic sanctions  233 correspondence accounts with Russian banks, were also affected by the sanctions, in spite of themselves not being target of the financial restrictions.19 Second, similarly to how EAEU countries could have been used to overcome Russian counter-sanctions after 2015, theoretically, EAEU countries could have been used to reroute export of sanctioned goods to Russia. For Russia, the attractiveness of using the EAEU states and free trade within the EAEU to get access to sanctioned goods increased dramatically with the sanctions regime becoming more severe; serving as an intermediary in trade with Russia turned into a highly lucrative opportunity for many countries from the EAEU states. The US and the EU have a potent tool to stop this rerouting at their disposal: they can impose sanctions on companies (or even countries) assisting Russia in accessing sanctioned goods and services; because of the much higher political stakes the EU and the US associate with the success of their sanctions policy, the probability of these secondary sanctions is also much higher. This development places countries like Kazakhstan or Armenia in a difficult position: to avoid secondary sanctions, they need to prevent their companies from exporting sanctioned goods to Russia, but this, in turn, is difficult to reconcile with the principle of free trade within the EAEU. The topic of using the EAEU states to overcome the new sanctions is a multi-faceted one, as is the sanctions regime itself. To start with, one has to distinguish between sanctions in the narrow sense (explicit export bans) and the decisions of individual companies to freeze their operations in Russia or to withdraw from the Russian market. The number of companies that actually did leave the Russian market is subject to debate (Evenett and Pisani, 2022; Sonnenfeld et al., 2023); important for me is the fact that the EAEU states can serve to overcome both official sanctions and self-imposed business bans, with the latter not triggering any danger of secondary sanctions. Here, rerouting of trade flows is less risky and more attractive; multinationals have only limited instruments of managing it (e.g., by refusing to send additional shipments of goods to countries experiencing suspicious increase of demand for goods not delivered to the Russian market anymore). Furthermore, it would be too simplistic to reduce the interests in using the EAEU to overcome sanctions merely to the priorities of the Russian regime or regime-affiliated business. Easy access to the financial system of the EAEU countries is of crucial importance for tens of thousands of Russians, including those trying to leave the country; the EAEU thus to some extent simplifies the new outbound migration processes from Russia, allowing migrants to maintain economic ties to Russia (Pylin, 2022). The early estimates seem to support the conjecture that the EAEU countries are used to reroute the trade flows to Russia. Thus, Chupilkin et al. (2023) argue that the decreasing trade between the EU and Russia in 2022 was accompanied by an increase of trade between the EU and Armenia, Kazakhstan and Kyrgyzstan, and both effects were particularly strong for sanctioned goods. There is anecdotal evidence of growing German exports to Armenia,20 of EAEU free market ensuring supply of consumer goods to Russia from companies which left the Russian market21 or of EU exports of consumer electronics to Eurasian countries growing

See https://​www​.rbc​.ru/​economics/​27/​05/​2022/​628f​80239a7947​c6e76bd799. See https://​www​.spiegel​.de/​wirtschaft/​russland​-sanktionen​-der​-verdaechtige​-boom​-bei​-deutschen​ -exporteuren​-a​-c37beb74​-baaa​-4f2b​-af8a​-adfe95867de3. 21 See https://​www​.politico​.eu/​article/​lithuania​-russia​-vladimir​-putin​-stop​-turning​-blind​-eye​-to​ -back​-doors​-for​-russian​-trade​-top​-diplomat​-tells​-eu/​. 19 20

234  The Elgar companion to the Eurasian Economic Union at an enormous rate,22 of Russian companies increasingly contacting firms in Kazakhstan searching for new supply routes,23 of Belarus exporting sanctioned goods to the EU through Kazakhstani and Kyrgyzstani firms,24 as well as of some Western countries moving their Eurasian business from Russia and Belarus to Kazakhstan.25 Obviously, providing a somewhat accurate estimate of the extent to which the EAEU allows Russia and Belarus to overcome sanctions is extremely difficult; any assessment is likely to be imprecise due to the opaque nature of the process. The official position of EAEU members is straightforward. High-level officials from Kazakhstan,26 Kyrgyzstan27 and Armenia28 explicitly stated that these countries do not help Russia with rerouting trade flows of sanctioned goods. In April 2023, Kazakhstan introduced a monitoring system for goods re-exported to Russia to ensure that it is not used to evade sanctions.29 The question remains, however, first, whether the bureaucracy of the respective countries will manage to successfully prevent any form of sanctions-breaking. While it may be possible for larger firms, one can hardly imagine that the public administration of Kazakhstan (which shares the longest border with Russia among all Russia’s neighbors) or Kyrgyzstan and Armenia (which have a much weaker state capacity) will effectively manage to undermine all flows in sanctioned goods, particularly if one takes into account the issue of corruption widespread in the region.30 Second, it is not clear how rigorous Eurasian countries themselves will be in enforcing their promises, being caught between pressure of the EU and the US and the fear of conflict against Russia. Even Russia, in fact, points out that the main task of the EAEU should be not to look for ways to evade sanctions but to strengthen the competitiveness of the member states31 – a topic I will discuss in greater detail in the next subsection. The example of Kazakhstan seems to provide evidence of careful balancing between the Western demands to implement the sanctions regime and the need to maintain good relations with Russia. In September 2023, the Kazakhstani president reassured the German federal chancellor that his country is going to implement all sanctions;32 one day later the president of Kazakhstan declared his country’s willingness to develop encompassing cooperation with Russia.33 In October 2023, the deputy minister of trade of Kazakhstan declared that Kazakhstan 22 See https://​www​.bloomberg​.com/​news/​articles/​2022​-10​-29/​putin​-stirs​-european​-worry​-on​-home​ -appliance​-imports​-stripped​-for​-arms. 23 See https://​www​.kommersant​.ru/​doc/​5886109. 24 See https://​rus​.ozodlik​.org/​a/​32347688​.html. 25 See https://​kz​.kursiv​.media/​2022​-12​-28/​bolee​-20​-kompanij​-reloczirovali​-iz​-rossii​-v​-kazahstan/​. 26 See https://​www​.interfax​.ru/​world/​832657. 27 See https://​www​.dw​.com/​ru/​glava​-mid​-kyrgyzstana​-my​-nikogda​-ne​-narusali​-zapadnye​-sankcii​ -protiv​-rf/​a​-66651602. 28 See https://​tass​.ru/​mezhdunarodnaya​-panorama/​17184007. 29 See https://​www​.ft​.com/​content/​b4e8c02a​-adb5​-4148​-9b15​-c0cf2845fa0f. 30 In May 2023, there was some evidence of changing the directions of some of the trade flows going to Russia via Kazakhstan (because of more rigorous monitoring on the Kazakhstani side). See https://​ www​.kommersant​.ru/​doc/​5977754. 31 See https://​www​.economy​.gov​.ru/​material/​press/​stati​_i​_intervyu/​dmitriy​_volvach​_deyatelnost​ _eaes​_napravlena​_ne​_na​_obhod​_sankciy​_a​_na​_vzaimovygodnoe​_razvitie​_ekonomik​.html. 32 See https://​www​.berliner​-zeitung​.de/​news/​praesident​-kasachstan​-qassym​-schomart​-tokajew​ -kasachstan​-wird​-sanktionen​-gegen​-russland​-einhalten​-oellieferungen​-nach​-deutschland​-erhoehen​-li​ .436327. 33 See https://​iz​.ru/​1581565/​2023​-09​-29/​tokaev​-zaiavil​-o​-namerenii​-kazakhstana​-razvivat​ -vsestoronnee​-sotrudnichestvo​-s​-rf.

EAEU and economic sanctions  235 will impose a ban on exporting 106 dual use goods articles to Russia;34 immediately after that, the Ministry of Trade announced that no restrictions have been introduced.35 This pattern could persist in the long run. 16.3.3 The War in Ukraine: Responses of the EAEU How does the EAEU as an organization react to the sanctions? The website of the Eurasian Economic Commission, as of 1 May 2023, contained 56 news entries where the word “sanctions” was mentioned. Most of them are relatively generic statements, providing no specific descriptions of economic policies which the EAEU could engage in to overcome the consequences of the sanctions. In May 2022, the official representative of the EAEC, Iya Malkina, describing possible responses of the EAEU to sanctions, mentions several directions of the reaction of the EAEU, including improvement of logistics and greater use of domestic currencies in internal trade. However, the only specific measure mentioned is the reduction of import duties for 1,500 critical import goods; facilitated licensing of medical products; as well as an increase of the limit of duty-free import for individuals.36 In June 2022, the chairman of the EAEC Board, Mikhail Myasnikovich, indicates that the EAEU will respond to sanctions pressure by improving competitiveness, increasing the share of domestic currencies in the transactions, as well as creating new transportation corridors. The EAEU, according to Myasnikovich, has prepared a “map of industrialization” containing 170 industrial projects potentially interesting to multiple EAEU members.37 The comment of Myasnikovich, however, remains highly unspecific. In February 2023, the minister of agriculture and industry of the EAEC Board, Artak Kamalyan, refers to 25 import substitution projects implemented in the EAEU in 2021–2022.38 In an article published in January 2023, Myasnikovich, while talking about the contribution of the EAEU to achieving “technological sovereignty”, remains even more bureaucratic, citing the increasing number of meetings of the EAEU bodies and decisions passed by those.39 Other statements of the EAEU officials dealing with sanctions have similar content and focus (see also Libman, 2023). In a nutshell, the EAEU’s reaction to the sanctions seems to be twofold. In the short run, the organization responded to the sanctions pressure by liberalizing foreign trade, which certainly helped Russia to reorganize the supply chains at least to some extent. In the long run, EAEU officials discuss (rather unspecifically) how the EAEU could contribute to the competitiveness of its members, and address the topic of industrial policy.40 While the rhetoric is generally very vague, some more specific examples should be mentioned. In August 2022,

34 See https://​kaztag​.kz/​ru/​news/​kazakhstan​-zapretil​-eksport​-106​-vidov​-godnykh​-k​-ispolzovaniyu​-v​ -voyne​-tovarov​-v​-rossiyu. 35 See https://​www​.gov​.kz/​memleket/​entities/​mti/​press/​news/​details/​639268​?lang​=​ru. 36 See https://​eec​.eaeunion​.org/​news/​speech/​importozameschenie​-rost​-platezhej​-v​-natsvalyutah​-kak​ -eaes​-protivostoit​-sanktsionnomu​-davleniyu​-zapada/​?sphrase​_id​=​182294. 37 See https://​eec​.eaeunion​.org/​news/​speech/​myasnikovich​-nado​-provodit​-soglasovannuyu​-politiku​ -a​-ne​-zakryvat​-glaza​-pelenoj​-sankcij/​?sphrase​_id​=​182294. 38 See https://​eec​.eaeunion​.org/​news/​speech/​za​-2021​-2022​-gody​-v​-eaes​-realizovano​-25​-proektov​ -po​-​importozam​eshcheniyu​-na​-summu​-svyshe​-21​-milliarda​-dollarov/​?sphrase​_id​=​182294. 39 See https://​eec​.eaeunion​.org/​news/​speech/​novye​-stranitsy​-integratsii​-v​-evrazijskom​ -ekonomicheskom​-soyuze/​. 40 See also Chapter 5 of this Companion.

236  The Elgar companion to the Eurasian Economic Union EAEU members decided to establish a joint reinsurance company to overcome the decision of Western companies to stop providing insurance services for Russian goods;41 the Russian government approved the establishment of the company in March 2023.42 The company is going to be a relatively small one, with equity capital of 15 bn RUB (about 200 mn USD).43 In June 2022, the EAEU agreed to create a specialized commission on import substitution and industrial policy,44 and in October 2022 approved the pilot project on subsidizing interest rates for several industrial cooperation projects involving companies from at least three EAEU countries.45 The fundamental problems of joint industrial policy in the EAEU are twofold. First, they require changing the format of cooperation and, in particular, much larger pooling of financial resources at the EAEU level to provide incentives for companies. It is not clear whether the EAEU countries would be ready for such a development or whether they would have the necessary financial resources in the future. In December 2022, the EAEC officials discussed the potential financial support for joint industrial cooperation projects to be 20 mn USD,46 which is hardly enough for a substantial cooperation. Second, most EAEU countries do not have the necessary technological and industrial potential to really contribute to overcoming the new challenges Russia is facing because of sanctions. The EAEC itself recognizes that the bulk of technological potential of the EAEU is concentrated in Russia.47 The role of China in this respect is likely to be much more prominent. Given the importance of payment system restrictions, a crucial question which the EAEU will potentially have to deal with is going to be the organization of payments between the EAEU countries. Here, somewhat ironically, the EAEU should deal with issues that were at the core of post-Soviet regionalism in the early 1990s. In the first half of the 1990s, post-Soviet countries lacked freely convertible currencies and, as a result, organization of a payment system belonged to the key tasks of regional integration, with a (ultimately defunct) CIS Payment Union being established (Glazkova, 2006). Stabilization of post-Soviet economies, introducing freely convertible currencies and abolishing measures of foreign exchange control, made such infrastructure in the post-Soviet Eurasia redundant. Sanctions against Russia, combined with the reintroduction of foreign exchange controls by the Russian Central Bank (which most likely will remain part of the Russian economy for a prolonged period of time), may make the creation of a new payment system in the EAEU an important topic. The discussion on this issue is ongoing;48 EAEU officials even mention a unified payment system of the EAEU and the BRICS49 (whether such a project would be realistic is of course subject to debate: in addition to the coordination problems and the costs of such a system, it could trigger 41 See https://​www​.vedomosti​.ru/​economics/​articles/​2022/​08/​29/​937980​-eaes​-strahovschika​ -torgovli. 42 See http://​government​.ru/​news/​48067/​. 43 See https://​tass​.ru/​ekonomika/​16955609. The equity capital of Munich Re, to provide a comparison, was 21 bn EUR as of 31 December 2021. 44 See https://​www​.kommersant​.ru/​doc/​5423263. 45 See https://​www​.kommersant​.ru/​doc/​5632150. 46 See https://​eec​.eaeunion​.org/​news/​speech/​artak​-kamalyan​-​%C2​%ABnesmotrya​-na​-slozhnuyu​ -ekonomicheskuyu​-politicheskuyu​-i​-​epidemiolo​gicheskuyu​-konyunkturu​-promyshlennyj​-sektor​-eaes​ -prodolzhaet​-demonstrirovat​-pozitivnuyu​-dinamiku​%C2​%BB/​. 47 See https://​www​.kommersant​.ru/​doc/​5446075. 48 See https://​www​.kommersant​.ru/​doc/​5534775. 49 See https://​eec​.eaeunion​.org/​news/​eaes​-i​-briks​-prorabotayut​-sozdanie​-universalnoy​-platezhnoy​ -sistemy​-i​-nezavisimykh​-mezhdunarodnykh​-in/​.

EAEU and economic sanctions  237 secondary sanctions of the EU and the US; furthermore, even if implemented, the currency of the new payment system is likely to be renminbi yuan).

16.4

CONCLUSION AND OUTLOOK

It remains to summarize the main conclusions of the chapter. Sanctions had a profound impact on the development of the EAEU from its first days, primarily due to two channels: overall negative impact on economic performance of its member countries (and especially the key country – Russia) and redistribution effects driven by rerouting of trade flows. The latter caused frictions in the EAEU: while in 2014–2015 rerouting undermined the official goals of the Russian leadership, since 2022 rerouting has benefited the Russian economy and regime, but put smaller EAEU countries at risk in terms of potential secondary sanctions of the EU and the US. Conflicts associated with possible change of trade flows due to sanctions certainly adversely affected the regional cooperation in the EAEU, although it is difficult to assess how large this effect was as opposed to other barriers to regionalism (discussed in other chapters of this Companion). The severe sanction regime introduced against Russia in 2022 is likely to persist in the long run. From this point of view, the question emerges whether the EAEU is going to establish institutions and cooperation formats explicitly allowing Russia to reduce the sanctions pressure. There is some discussion of these formats ongoing, but as of now most of the measures suggested by the EAEU in the area of industrial policy and new institutions of cooperation remain rather unspecific. This is driven, again, by the fear of secondary sanctions, but also by unclear economic benefits of these institutions and cooperation formats: on the one hand, smaller countries of the EAEU hardly have the necessary technological potential to support Russia in the areas in which it is challenged, and on the other hand, interest of smaller countries to cooperate with Russia given the economic difficulties the latter experiences also goes down. On top of that, new institutions and formats of cooperation require substantial changes in how the EAEU bureaucracy operates and even which goals the EAEU sets; whether the EAEU is capable of this transformation is questionable (Libman, 2023). The fact that the Russian economy is entering a period of stagnation and degradation will further reduce the attractiveness of a transformation of the EAEU aiming at supporting Russia from the perspective of smaller countries. At the same time, the future effect of the sanctions regime on the EAEU also depends on the general developments of the world economy.50 War in Ukraine appears to be a trigger of broader deglobalization processes, with the world becoming more fragmented and split into economic blocs. This development is supported by both the Western countries (which now perceive cooperation with authoritarian states of the East and the South as a risk rather than an opportunity) and autocratic states like China (which fear becoming targets of the Western sanctions weapon in the future). This fragmentation would lead to massive negative consequences for smaller landlocked countries of the post-Soviet Eurasia, but could also be problematic for bigger countries like Kazakhstan (which will find it increasingly difficult to maintain the multi-vector approach to economic and political relations). Under these condi-

50

See Conclusion in this Companion.

238  The Elgar companion to the Eurasian Economic Union tions, the value of regional institutions facilitating cooperation would increase, and the EAEU could benefit from it – less so, however, than regional integration projects including China, which most likely will become particularly important in the new deglobalized world for many post-Soviet countries.51

REFERENCES Aituar, A. (2021). Trade sanctions and Customs Union partners of the target country: Evidence from Kazakhstan. Peace Economics, Peace Science and Public Policy, 27(4), 549–566. Baldwin, D. A. (1999). The sanctions debate and the logic of choice. International Security, 24(3), 80–107. Bayramov, V., Rustamli, N., & Abbas, G. (2020). Collateral damage: The Western sanctions on Russia and the evaluation of implications for Russia’s post-communist neighbourhood. International Economics, 162, 92–109. Booth, A. R. (1989). South Africa’s hinterland: Swaziland’s role in strategies for sanctions-breaking. Africa Today, 36(1), 41–50. Borzyskowski, I. V., & Portela, C. (2016). Piling on: The rise of sanctions cooperation between regional organizations, the United States, and the EU. KFG Working Paper “The Transformative Power of Europe” Series No. 70. Chupilkin, M., Javorcik, B., & Plekhanov, A. (2023). The Eurasian roundabout: Trade flows into Russia through the Caucasus and Central Asia. EBRD Working Paper 276. Drezner, D. W. (1999). The Sanctions Paradox: Economic Statecraft and International Relations. Cambridge: Cambridge University Press. Evenett, S., & Pisani, N. (2022). Less than nine percent of western firms have divested from Russia. Available at SSRN 4322502. Garashchuk, A., Podadera, R. P., & Isla, C. F. (2023). The Eurasian Economic Union in search of strategic partners: The gravity effects of integration blocs. Panoeconomicus, 70(1), 155–179. Gibb, R., & Treasure, K. (2011). SACU at centenary: Theory and practice of democratising regionalism. South African Journal of International Affairs, 18(1), 1–21. Gibb, R., & Treasure, K. (2014). From colonial administration to development funding: Characterisations of SACU as a governance mechanism. Journal of Southern African Studies, 40(4), 819–838. Giumelli, F., Hoffmann, F., & Książczaková, A. (2021). The when, what, where and why of European Union sanctions. European Security, 30(1), 1–23. Glazkova, N. (2006). Platezhnyi soyuz SNG: Genezis i napravlenie sovershenstvovaniya. Vestnik Volgogradskogo Universiteta, 10, 145–150. Hellquist, E. (2014). Regional organizations and sanctions against members: Explaining the different trajectories of the African Union, the league of Arab States, and the association of Southeast Asian Nations. KFG Working Paper “The Transformative Power of Europe” Series No. 59. Kaminski, B., & Raballand, G. (2009). Entrepôt for Chinese consumer goods in Central Asia: The puzzle of re-exports through Kyrgyz bazaars. Eurasian Geography and Economics, 50(5), 581–590. Libman, A. (2015a). Ukrainian crisis, economic crisis in Russia and the Eurasian Economic Union. MPRA Working Paper. Libman, A. (2015b). Wirtschaftskrise in Russland: Risiken und Kosten für andere Länder Eurasiens. SWP Aktuell 10. Libman, A. (2022). Does integration rhetoric help? Eurasian regionalism and the rhetorical dissonance of Russian elites. Europe-Asia Studies, 74(9), 1574–1595. Libman, A. (2023). A liberal international organization with an illiberal core? Eurasian Economic Union and international crises in Eurasia. Mimeo. Lukaszuk, P. (2021). You can smuggle but you can’t hide: Sanction evasion during the Ukraine crisis. Aussenwirtschaft, 71(1), 73–125. See also Chapter 11 in this Companion.

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EAEU and economic sanctions  239 Palestini, S. (2021). Regional organizations and the politics of sanctions against undemocratic behaviour in the Americas. International Political Science Review, 42(4), 469–483. Pollitt, B. H. (2004). The rise and fall of the Cuban sugar economy. Journal of Latin American Studies, 36(2), 319–348. Portela, C. (2010). European Union Sanctions and Foreign Policy: When and Why Do They Work? London: Routledge. Pylin, A. (2022). Transformatsiya postsovetskoi evraziiskoi integracii v usloviyakh sanktsii: Vozmozhnosti i rski. Vestnik Instituta Ekonomiki RAN, 6, 127–141. Rogov, K. (Ed.) (2023). Khuzhe chem krizis: Kak ustroena i kuda vedet rossiyskaya ekonomicheskaya anomaliya 2022. RE: RUSSIA Report. Sonnenfeld, J., Mylovanov, T., Shapoval, N., Tian, S., Onopriienko, A., Hirsty, G., & Wyrebkowski, M. (2023). The Russian business retreat: How the ratings measured up one year later. Available at SSRN 4343547. Svoboda, K. (2021). Norms as a political weapon? Sanitary, phytosanitary, and technical norms as Russia’s foreign trade tool. Problems of Post-Communism, 68(1), 66–73. Tyazhelnikov, V., Romalis, J., & Long, Y. (2022). Russian Counter-Sanctions and Smuggling: Forensics with Structural Gravity Estimation. Mimeo. Vieira, A. (2017). A tale of two unions: Russia–Belarus integration experience and its lessons for the Eurasian Economic Union. Journal of Borderlands Studies, 32(1), 41–53. Vinokurov, E., & Libman, A. (2014). Do economic crises impede or advance regional economic integration in the post-Soviet space? Post-Communist Economies, 26(3), 341–358. Vinokurov, E., & Libman, A. (2017). Re-Evaluating Regional Organizations: Behind the Smokescreen of Official Mandates. Cham: Palgrave Macmillan. Yeliseyeu, A. (2017). Belarusian shrimps anyone? How EU food products make their way to Russia through Belarus. Think Visegrad – V4 Think Tank Platform.

17. “Made in Kyrgyzstan”: an ethnographic exploration of “new entrepreneurs” entering the Eurasian Economic Union Philipp Schröder1

17.1 INTRODUCTION Accession to the Eurasian Economic Union (EAEU) in 2015 marked a pivotal moment in Kyrgyzstan’s national economic history. Following the Soviet Union’s dissolution in 1991, and after a challenging decade of (shock-therapy) transformation, Kyrgyzstan had evolved into Central Asia’s key entrepôt for goods “made in China” after the millennium (Pétric, 2015). Between 2002 and 2008, the annual import of Chinese consumer products increased from $146 million to $9.20 billion. Trade became an essential lifeline for many in Kyrgyzstan, and the estimated value of Chinese goods that were re-exported to Uzbekistan, Kazakhstan and Russia reached as high as 77% of Kyrgyzstan’s GDP (Kaminski and Mitra, 2012). Behind such strong dependency on cross-border trading, Kyrgyzstan’s road to membership in the EAEU was met with widespread anxiety that joining this customs regime and facing higher import tariffs would mean that “our [Kyrgyz] bazaars are dying!” (see also Karrar, 2017). Not surprisingly, public support for the EAEU in Kyrgyzstan declined from 72% in 2011 to 49% in 2014.2 Also, the EAEU’s political dimension was controversially debated at that time, in particular as to whether Russia was leveraging future collaborations in the energy sector or the status of Kyrgyzstan’s labor migrants in Russia to enforce membership (Tiulegenov, 2015). After dragging its feet as long as possible, in August 2015 Kyrgyzstan eventually joined Armenia, Belarus, Kazakhstan and Russia as the fifth EAEU member country. As an economic union, the EAEU’s declared purpose is to enable the free movement of goods, capital, services and people within its single market of about 184 million people. To this end, the EAEU installed various supranational and intergovernmental bodies that should coordinate and harmonize economic policies between member states, including technical regulations and customs. When viewed within Kyrgyzstan’s national trajectory, entry into the EAEU introduced a new degree of economic integration, oversight and formalization, in particular when compared with the earlier post-Soviet times that were characterized by informal trading and a “wild capitalism” (Schröder, 2018, 2020). Around 2015, local opinions about Kyrgyzstan tying its economic future to the EAEU diverged: some criticized that a dependency on Russia and joining a too narrow (post-Soviet) market of only five members was undesirable; others highlighted that the requirement to

This contribution draws on chapters from Schröder (2021). See https://​geohistory​.today/​kyrgyzstan​-eurasian​-economic​-union/​ (last accessed 22 February 2022). 1 2

240

“Made in Kyrgyzstan”: “new entrepreneurs” entering the Eurasian Economic Union  241 comply with the EAEU’s stricter regulations and standards would “tame” Kyrgyzstan’s hitherto “chaotic” economy and prepare it for even more lucrative markets, such as that of the European Union. My chapter’s objective is not to contribute to this systemic debate, which is at the core of other chapters of this Companion. More importantly for me, these opposing views captured quite accurately the mood about Kyrgyzstan becoming part of the EAEU, which was marked by an uncertainty about the economic future: either with a touch of hope that sensed new opportunities, or with an anxiety about established business models being jeopardized. Beginning from this, my chapter offers in-depth ethnographic insights on how entrepreneurs in Kyrgyzstan, representative of a small nation and widely informal market, adjusted to a macro-level policy harmonization and economic integration effort, such as that of the EAEU. The evidence for this chapter was gathered during fieldwork between 2013 and 2018 across Kyrgyzstan, when and where I encountered businesswomen and men who operated in the manufacturing and agricultural sectors. Because I was in touch with these same interlocutors repeatedly during the course of up to five years, my empirical contribution offers more than a snapshot that was taken during a narrow timeframe, but allows to situate these adjustments within a wider chronological frame. Such a processual perspective, as I outline in the concluding segment, is critical to understand that Kyrgyzstan’s integration story with the EAEU is one of a national economy’s formalization, diversification and specialization. In order to get there, the segments before are organized according to conditions and adjustments that were specific for the economy of Kyrgyzstan. They are entitled “Localization of Capital”, “Loans & Service Sector Integration” and “Standardization and Government Neglect”.

17.2

LOCALIZATION OF CAPITAL

The first adjustment I want to discuss concerns the localization of capital. To do that, I draw on evidence from Kyrgyzstan’s apparel industry, which presently contributes up to 15% of the GDP and has re-emerged as a structurally relevant source of occupation for about 300,000 Kyrgyzstanis (Spector and Botoeva, 2017; Jenish, 2014). The main destination markets for clothing “made in Kyrgyzstan” are Russia and Kazakhstan. Its export value has increased about 30-fold between 2002 and 2018, from $5.6 million to $150 million, and accounts for 10.6% of Kyrgyzstan’s total exports (Tilekeyev et al., 2020). A look at entrepreneurs in Kyrgyzstan’s apparel industry shows that their readiness to “put more money” (polojit pobolshe deneg)3 into production facilities, equipment and human resources was an equally necessary and profitable choice within the EAEU environment. Also, making such larger-scale investments introduced a new business model at that time, which for many represented an upgrade from having been “simple traders” to becoming manufacturers of clothes “made in Kyrgyzstan”. Askat’s venture to establish a “jogging suite factory” in Bishkek illustrates this quite well. Before 2015, Askat had made a fortune by importing ready-made jogging suits from Turkey, which he wholesaled to partners in Kyrgyzstan and Kazakhstan. His profit margin was solid, especially because Askat had grown into “dealing” with large quantities. At the end of his peak



3

All passages in italics are in Russian.

242  The Elgar companion to the Eurasian Economic Union year, Askat claimed, he had brought a total of 330 tons of jogging suits into Kyrgyzstan via air cargo. But Kyrgyzstan’s entry into the EAEU, specifically changes to the customs tariff scheme for merchandise imported from non-member countries, forced Askat to reassess. In his case, customs duties for importing Turkish fabric, which was considered a raw material, amounted to $1 per kilogram, whereas processed fabric, such as jogging suits, were calculated at $4 per kilogram.4 This marked the moment when Askat set off to become an entrepreneur in Bishkek’s “self-sewing” sector (samoposhiv). He purchased 5,000 square meters of land and within some months erected a two-storey “factory” (fabrika) on it. The building featured working spaces with new sewing machines and a design section with new computers. Askat hired 70 employees, among them seamstresses, accountants, technologists and designers. On the fabrika’s second floor there were kitchens and sleeping quarters which Askat offered to his employees free of charge. At that time, a seamstress could earn about $300 per week with him, which was four times the average salary in Bishkek.5 Askat’s sizeable investment in establishing and equipping a manufacturing facility, and in attracting qualified and productive workers, also paid off for him. When we spoke one year after the fabrika’s opening, Askat was very content that he had managed to increase his profit margin to $5 per unit, while producing even higher numbers in Bishkek, almost 150,000 pieces annually, than he used to import from Turkey. Askat made a bold move, which was possible because he had been a sizeable player in the apparel industry already before. A more refined analysis of how someone gradually evolves her position in a value chain is possible when following Zamira’s story. Zamira started out in 2012 renting a trade-container in Dordoi, Bishkek’s largest bazaar, where she offered women’s fashion. At that time, she sold one of her women’s blazers at around $9, while her production costs amounted to $6.50. Of these production costs, about two thirds were for the fabric, which Zamira bought at a specialized bazaar elsewhere in the city, and about one third went to the sewing workshop (tsekh) from which Zamira ordered her clothes to be made. During the next five years, Zamira made two relevant adjustments to her original business model. First, she continuously expanded the volume of her production, and in 2015 already sold 2.5 times more units than in 2012. She accomplished that by ordering from a second tsekh, because her original partner alone could not deliver in due time the higher unit numbers that Zamira needed. Second, in early 2017 Zamira stopped out-sourcing the manufacturing of her clothes to other sewing workshops. Instead, she used her accumulated capital to rent a basement facility with six rooms for about $450 per month. There, she established 20 workspaces with new sewing machines and other equipment. During peak production times, Zamira could switch to a two-shift regime and so have 40 seamstresses work for her during 24 hours. These adjustments allowed Zamira to manage Kyrgyzstan’s entry into the EAEU without negative impact on her business. She could decrease her selling price, which in US dollars actually declined from $9 in 2012 to $8 in 2017. Therefore, Zamira could not only keep her original customers, including those from non-EAEU members, such as Tajikistan or Uzbekistan, but even further expand her client-base. When assessing her prices, Zamira In more abstract terms, Kyrgyzstan’s so called Applied Most-Favored Nation Average Tariff (MFN) increased from 4.6% in 2013 to 7.5% in 2015 (Tarr, 2016). 5 See http://​www​.stat​.kg/​en/​opendata/​category/​112/​ (last accessed 3 February 2022). 4

“Made in Kyrgyzstan”: “new entrepreneurs” entering the Eurasian Economic Union  243 emphasized the role of exchange rates between regional currencies and the US dollar, which was her primary means of conducting business. But even more, she needed to handle the effect from constantly increasing labor costs: between 2012 and 2017 local seamstresses demanded 22% more in US dollars for producing one piece of clothing. Eventually, for Askat, Zamira and others in Kyrgyzstan’s sewing industry, the key adjustment to remain profitable was to take control of production capacities and cycles. But once they manufactured clothes “made in Kyrgyzstan”, their country’s EAEU membership worked to their advantage, because their merchandise could now be distributed to the main destination markets of fellow member states Kazakhstan and Russia without custom expenses. There was of course more to the entrepreneurial success of Askat and Zamira than all the adjustments to their business model mentioned so far. Personal determination and reputation played a role, same as having the “easy hand” (zhengil kol) of a good trader, and other micro-strategies of selling and networking. Zamira also profited from the non-patriarchal labor-sharing arrangement with her husband, who took over care duties for their children and in the household when necessary. But let me end this segment with a focus on some of the immaterial repercussions that evolved from the localization of capital and the evolution towards being an entrepreneur. Among the likes of Askat and Zamira, their readiness to invest in facilities, equipment and personnel, which they also called a “settling down” in Bishkek’s business landscape, contributed to a change in attitude. It became part of their “entrepreneurial spirit” and self-presentation of success to articulate a distinct pride for “producing something here in Kyrgyzstan”. More specifically, they framed “being an employer” and “feeding families” as their responsible contribution for the “development of the country” (rasvitiia strany). Analytically, such perspective follows the logic that “productive citizens”, who (supposedly) elicit economic growth would most effectively contribute to reduce poverty and inequality (Beresford, 2021). Indeed, the likes of Zamira and Askat were “new entrepreneurs” in quantitative terms, because they expanded the otherwise marginal segment of small- and medium-sized enterprises in Kyrgyzstan’s economy, which has been dominated by single independent entrepreneurs (Rudaz, 2017). What is also “new”, and distinguishes these entrepreneurs from traders, is a more self-confident stance towards the government. Whereas traders aspired to remain below the authorities’ radar, and expected to pay bribes where and when necessary, the new entrepreneurs concluded that the socio-economic “added value” of creating jobs and contributing higher tax loads should translate into a moral legitimation: on grounds of which they could reject attempts by officials at bribery and other extortion and expect state institutions to engage with them more constructively (although this had not yet materialized during the time of my fieldwork).

17.3

LOANS AND SERVICE SECTOR INTEGRATION

The previous segment discussed the localization of capital as a specific on-the-ground adjustment that enabled Kyrgyz clothing entrepreneurs to transit across the 2015 accession of their country to the EAEU. On the following pages, I draw on insights gained from entrepreneurs

244  The Elgar companion to the Eurasian Economic Union operating in light manufacturing, which is a focal point of both Kyrgyzstan’s national development agenda and of the EAEU.6 The significance, economically and emotionally, that has been attributed to a post-transformation “industrial revival” in Kyrgyzstan can be assessed from a look into economic history. While during the Soviet era the industrial sector accounted for 30% of both the GDP and the labor force, until 2009 employment in the secondary sector had decreased to 19% and productivity had declined by 75% (as compared to 1990; Mogilevsky and Omorova, 2011; Abazov, 1999). With that in mind, the present segment will begin from a structural effect that Kyrgyzstan’s EAEU membership had: the creation of the Russian-Kyrgyz Development Fund (RKDF) and its instrument to provide business loans at significantly lower rates than local banks in Kyrgyzstan had offered before. The RKDF emerged in 2014 out of an intergovernmental agreement between Russia and Kyrgyzstan. Its original capital endowment was $1 billion, half of which was the fund’s charter capital (contributed from Russia’s federal budget) and the other half was a loan (Tiulegenov, 2015). The main mission of the RKDF is to assist the integration of Kyrgyzstan’s economy within the EAEU and to promote development in certain priority sectors, particularly manufacturing and agriculture. Unofficially, the creation of the RKDF was widely perceived as a means to compensate Kyrgyzstan for the anticipated losses occurring from its entry into the EAEU, notably the decrease in re-export trade of Chinese consumer goods. Let me illustrate the RKDF’s effect with the example of Igor’s “paper company”, which is based in Bishkek. Founded already in 2009, the paper company remained a low-key, dormant enterprise until 2016. At that time, Igor decided to leave behind his actual profession of being a lawyer and began searching for investment capital. Through his local bank, he learned that a manufacturing business such as his own was eligible for a subsidized RKDF loan. At 12% annual interest rate for a loan in Kyrgyzstani Som, this offer was decisively lower than the regular ones of 20–24%. The RKDF loan enabled Igor to grow the paper company at a faster pace and a larger scale than he originally considered possible. His major investment was ISO-standardized machines to cut, color and sort raw paper material. Igor purchased this equipment in Turkey and then could import it exempt of customs fees, because of its designation as enabling local manufacturing in Kyrgyzstan. The machine-based automation allowed Igor to increase the volume, efficiency and quality of his production process. His assortment then included 80 different paper products, from napkins to paper towels and toilet paper, each available in “economy” or “premium” quality. Furthermore, Igor’s staff grew from 15 to 50 employees by 2017. This includes office and sales personnel, workers in the production hall and drivers delivering paper products to supermarkets and other outlets across the city. Two further aspects are remarkable about Igor’s paper company. The first concerns the degree to which Igor decided to invest in third-party business services. While entrepreneurs across Kyrgyzstan are unquestionably aware in theory that market research, marketing and advertising are key instruments to increase sales, at the time of my research only a minority seemed actually willing to allocate meaningful budgets to this. In contrast, Igor was convinced about the direct impact of good-quality Internet and TV clips and smart branding. 6 See http://​www​.eurasiancommission​.org/​ru/​Documents/​Industrial​_eng​.pdf (last accessed 17 February 2022).

“Made in Kyrgyzstan”: “new entrepreneurs” entering the Eurasian Economic Union  245 For example, he had Kyrgyz traditional ornaments and a “typical local family” added to his product designs, claiming that so far his profit had indeed increased “after every round of [such] advertisement”. During our encounters, Igor reflected being quite satisfied with the direction in which his company was heading. He was confident that he could produce good quality for a very good price. Evidence of that was his continuous expansion: aside from Bishkek and Osh, Kyrgyzstan’s second-largest urban market, his paper products could also be found in Kazakhstan, Tajikistan and Russia. This leads me to the second aspect. Igor’s paper company illustrates how a new financial instrument, here RKDF-subsidized loans, can support local entrepreneurship and create employment. But beyond that, the paper company also presents a case of how a particular segment within a national market might become less import-dependent. Enabled by higher-quality machinery and an updated business model, Igor’s paper products became competitive both in quality and pricing. For customers across Kyrgyzstan, they became true alternatives to those napkins or paper towels that were before exclusively imported from Russia or elsewhere. Igor’s localized advertisement campaigns featuring traditional ornaments, etc. pointed to this, and at the same time attempted to inspire loyalty to prefer something that was “made in Kyrgyzstan” over a foreign import. Yet still, when taking a value chain perspective, one clear limitation emerged for Igor. While comparing his paper company to that of his competitors in Russia, Igor pointed to their decisive advantage of having “the natural resources right in front of their door”. He, however, needed to devise a strategy for how to create a sufficient transnational supply of paper into Kyrgyzstan for further processing, which proved challenging in times of high paper demand and demonstrated a structural dependency. As part of my fieldwork, I gained intimate knowledge also of other business ventures that were supported by RKDF loans. These operated in different economic segments than Igor’s paper company, and they varied in scales of investment, output and personnel. But what they shared was the aspiration to ascend into a more profitable position within regional (Eurasian) value chains by manufacturing and marketing products that before had been imported into Kyrgyzstan from abroad, i.e. by conducting “higher value-added activities” such as product development and design (Gereffi and Lee, 2012). One exemplary case was “Tekstil Trans”, a flagship project of the RKDF in the textile industry that was often taken as a sign of hope for Kyrgyzstan’s post-Soviet industrial rejuvenation. Supported by a $7.5 million loan through the RKDF, and $2 million in own equity, “Tekstil Trans” built an imposing new headquarters 90 minutes away from Bishkek. The building hosted offices, laboratories and sizeable halls for fabric production and sewing, equipped with new machinery imported from Turkey and Germany. “Tekstil Trans” provided employment for more than 300 people, most of them from village communities close by and returning labor migrants from Russia. Company managers emphasized two financial aspects that were critical for the successful capitalization of their endeavor: first, a credit volume as high as $7.5 million had been“unimaginable in Kyrgyzstan” before the RKDF; second, that repayment of such credit volume became feasible only due to such favorable conditions as a 4% annual interest rate and a 12-month grace period until the first instalment was required. Maybe most importantly, “Tekstil Trans” became a game-changer because it created the opportunity that cotton fabric was produced inside Kyrgyzstan instead of being imported ready-made from China, Turkey or Uzbekistan (Tilekeyev et al., 2020). “Tekstil Trans” continued to depend on cotton yarns being imported from Uzbekistan or Tajikistan, and on

246  The Elgar companion to the Eurasian Economic Union the colors to stain these yarns, which were imported from Turkey. But the ability to process these yarns independently created a cost-effective flexibility in regards to own requirements for design and quality. Being able to produce according to the ISO 9001 or the Oeko-Tex 100 standards enabled “Tekstil Trans” to target more profitable consumer markets, and they already had supply agreements with Russian and European clothing outlets. Furthermore, “Tekstil Trans” became a national supplier from which other companies in Kyrgyzstan’s vibrant sewing industry could directly order cotton fabric. During my fieldwork, entrepreneurs such as Igor or “Tekstil Trans” were enthusiastic about the RKDF being an unprecedented “new player” (novyi igrok) in Kyrgyzstan’s economic landscape that enabled the start-up of their businesses. Certainly, this does not answer the more pervasive question whether or not RKDF loans will in fact create sustainable and self-sufficient enterprises. But the least that has become evident is the way in which the RKDF was received as an instrument to boost nascent entrepreneurial ambitions in Kyrgyzstan, and by that to lower “entry barriers” into Russian-driven value chains for products from Kyrgyzstan (Thomsen, 2011). When examining entrepreneurial success such as the one experienced by Igor, “Tekstil Trans” or other RKDF borrowers across Kyrgyzstan, it should not be ignored that considerable financial literacy is necessary to secure such favorable loans in the first place. Preparing a convincing business plan, the proper filing of complex paperwork and other requirements proved a barrier in itself for those entrepreneurs who had no comparable educational background or previous professional record like Igor or “Tekstil Trans”, but who were used to running their business informally, impromptu, and on shorter time horizons (see e.g. Dergousoff, 2017; Heyat, 2002).

17.4

STANDARDIZATION AND GOVERNMENT NEGLECT

The last segment focused on enterprises in Kyrgyzstan’s sector of light manufacturing, such as paper or textile processing. This documented how the availability of a new financial instrument, i.e. business loans subsidized by the RKDF, allowed entrepreneurs to become national champions and be competitive within the wider regional market. The upcoming segment switches to businesses in agriculture. Despite the post-Soviet transformation from state-controlled collectives (kolkhozes and sovkhozes) to private and mostly smallholder crop and livestock farming, the agricultural sector has remained highly important for Kyrgyzstan. In 2015, it accounted for 15.9% of the GDP and 29.3% of the labor force (Mogilevskii et al., 2017; Yoshida, 2005). At the same time, the “agricultural GDP” has been subject to strong variation, increasing by 34% between 1998 and 2007, but then declining back to 19% until 2012 (Broka et al., 2016). From the time of Kyrgyzstan’s EAEU accession, the following examination of agricultural ventures indicates sector-specific challenges to business development that prevail despite sufficient capitalization and entrepreneurial prowess. More precisely, the case studies reveal that in times of the EAEU’s stricter policy regime, the effect of private sector support, such as the one provided by the RKDF, critically hinges on whether the public sector provides a necessary input or entrepreneurs encounter government neglect. Ahmet and Cholpon share with each other, and with the other Kyrgyzstani entrepreneurs portrayed earlier, an entrepreneurial spirit that is characterized by determination, flexibility,

“Made in Kyrgyzstan”: “new entrepreneurs” entering the Eurasian Economic Union  247 and the readiness to invest locally. Ahmet looks back on 15 years of experience in the sector of fruit-processing. His enterprise is located in Jalalabad, southern Kyrgyzstan. In 2017, he could offer 60 different products, ranging from various kinds of nuts and jams to stewed plums, pickled cucumbers and apricots in honey. Ahmet employs a permanent staff of 30, but during high season has up to 700 people working for him. During my last visit to his site, he was about to erect a new facility, equipped with cooling equipment, that would allow him to produce and store tomato paste and various fruit juices. Ahmet made these investments with export opportunities in mind. In light of Kyrgyzstan’s 2015 entry into the EAEU, his immediate focus was Russia. Longer term, he aspired for the European Union’s market. In his estimate, that would be even more lucrative, and had recently become more accessible via the GSP+ agreement,7 which removed tariff duties for more than 6,000 items originating from Kyrgyzstan. But until later in 2017, Ahmet could send his products to neither of these markets, for one and the same reason: he did not comply with the enhanced certification, phytosanitary and “rules of origin” requirements. This was deeply frustrating for Ahmet, because he had made all the necessary and costly arrangements, such as purchasing new ISO-standardized machinery and renovating his production site. The barrier he could not yet surpass was that he also needed official certification from a national laboratory that attested to his products’ compliance with EAEU or GSP+ standards. But in 2017, government-run laboratories in Kyrgyzstan still struggled with inadequate equipment, lacked international accreditation and knowledge about food safety standards, and were caught up in ministerial conflicts over competencies.8 But also, obtaining the precious certificates from laboratories in Kazakhstan or Russia proved too costly for Ahmet, as for most other agro-entrepreneurs in Kyrgyzstan. They were left with two alternatives: find other routes to foreign export markets or focus on selling their products locally. Ahmet achieved the former by utilizing his partnership with a major Turkish fruit distributor, who added his products to a network of 19 companies that were located in Italy, France and Germany. For now, this was a second-best solution for Ahmed, but selling directly to Europe without middlemen and higher profits remained his future goal. Cholpon, in contrast, opted for local sales. She ran a chicken farm and greenhouse outside of Osh in southern Kyrgyzstan. Her tomatoes and cucumbers would have been competitive in the Russian market, because, she stated, they were “grown organically” and based on “seeds from the Netherlands”. At a food fair in Moscow in 2016, Cholpon had already made an agreement with two Russian importers, but eventually could not meet their supply demands. This was associated with matters of certification, as in Ahmet’s case, but also concerned the higher order volume and speedier delivery time that Cholpon’s Russian partners expected. Therefore, she eventually started selling her greenhouse products to wholesalers in the Osh region. Cholpon does the same with the majority of the eggs that her 20,000 chickens produce. But looking at this line of her business also allows the illustration of another challenge that emerged for agro-entrepreneurs across Kyrgyzstan with the country’s membership in the EAEU. Cholpon was outraged during a conversation we had in 2017 when she recalled that

GSP stands for Generalized Scheme of Preferences, an EU instrument allowing access to the EU market by vulnerable countries (https://​policy​.trade​.ec​.europa​.eu/​development​-and​-sustainability/​ generalised​-scheme​-preferences​_en; last accessed 18 April 2023). 8 See https://​ec​.europa​.eu/​transparency/​regdoc/​rep/​10102/​2020/​EN/​SWD​-2020​-20​-F1​-EN​-MAIN​ -PART​-1​.PDF (last accessed 10 February 2022). 7

248  The Elgar companion to the Eurasian Economic Union recently Osh’s markets had been “swamped” by low-price eggs originating from Russia. She claimed that such “Russian eggs” could only be offered cheaper than local Kyrgyz ones “if they are already expired”, because their regular price in Russia was already higher and additional costs from transportation must have accrued as well. Looking beyond Cholpon’s accusation, her egg dilemma exemplifies how the widespread but misconceived hope that Kyrgyzstan would become an agricultural exporter into the EAEU was met with the harsh reality that a unified market paves a two-way street. The egg dilemma thus documents the unprecedented exposure of Kyrgyzstan’s predominantly smallholder and subsistence-oriented agricultural sector to regional, larger-scale competition that in comparison is more capitalized, automated, subsidized, and integrated in standardization regimes (Azarov et al., 2019). In regard to the latter, the egg dilemma also showcases the increasing relevance of certification and other formalizations for market success in Kyrgyzstan, which some agro-entrepreneurs framed as a “foreign occupation” by Russian economic policies. Packaging that carries the “Eurasian Conformity” mark (EAC), as did the “Russian eggs”, now challenge previously established, informal ways of knowing when to trust a product, such as the local reputation that “Cholpon’s eggs are good quality”. Many other agro-entrepreneurs in Kyrgyzstan, and beyond the fruit-processing, chicken and greenhouse segments, reported to be under similarly strong pressure from intra-EAEU competition, particularly from Kazakh and Russian companies. Not everyone found similarly workable solutions as Ahmet and Cholpon, and the high hopes for new export markets that those involved in Kyrgyzstan’s agricultural sector had associated with the EAEU entry were soon and widely disappointed. More technically speaking, Ahmet and Cholpon provide illustrations for the fact that so-called “non-tariff barriers to trade” (NTBs), such as (phyto)sanitary measures, technical regulations or illegitimate national subsidies, accounted for 15–30% of the total trade export value among EAEU member states (Vinokurov et al., 2015, p. 60). This is of critical relevance in Kyrgyzstan, because of the essential role that agrarian income has for poverty reduction in rural areas (Dergousoff, 2017).

17.5 CONCLUSION This chapter has followed the ways in which entrepreneurs representing different sectors of Kyrgyzstan’s economy responded to their country’s accession to the EAEU. I highlighted three aspects. First, the readiness to localize capital in terms of investing in equipment, facilities and human resources, which promises more control of production capacities and cycles, and so leads to the “higher value-added activity” of manufacturing a good (Gereffi and Lee, 2012). Second, that (RKDF-)subsidized loans, which offered more credit volume and more favorable conditions than prior to the EAEU, enabled and accelerated business development, mitigated financial risks, and increased the competitiveness of goods from Kyrgyzstan. Third, that in a process of transnational market integration and policy harmonization, as was the case for the EAEU between 2015 and 2017, private sector initiatives were jeopardized whenever they were not accompanied by public sector inputs in infrastructure, legislation or education. As of 2017, this last aspect was especially felt across Kyrgyzstan’s agricultural sector. Unlike in the preceding decades, the main obstacles for agro-businesses in Kyrgyzstan were no longer logistics of long-distance transportation to the lucrative Russian markets, or their Russian buyers’ expectation that they should pre-finance their daily operations and provide

“Made in Kyrgyzstan”: “new entrepreneurs” entering the Eurasian Economic Union  249 other services (Thomsen, 2011, 2016). Instead, the new challenge was an absence of sufficient national testing capacities that could have certified the compliance of local food items with the EAEU’s (phyto)sanitary and other standards. Unlike in other parts of the former Soviet Union, entrepreneurs across all sectors of Kyrgyzstan’s economy did not anymore aspire to “avoid officialdom” (Kennedy, 2017), but openly voiced their complaints about government inaction, neglect or even obstruction. Their discontent concerned matters such as the authorities’ unwillingness or incapacity to grant tax exemptions, to curb bribery from officials, to protect national and foreign investments, or to counter (illegitimate) measures of export subsidy practiced by financially stronger neighboring states (Kourmanova, 2015; Khasanova, 2017). The underperforming state was increasingly confronted with a more self-confident “entrepreneurial spirit”, which entailed the moral expectation that “developing the country” and “creating jobs” would translate into a more benevolent and constructive treatment for the public sector. This position was strengthening and gained further momentum around the time of Kyrgyzstan’s EAEU accession with the emergence of new business associations and lobbying groups that consolidated a previously dispersed private sector (Schröder and Schröder, 2017). When viewed within a timeframe that reaches back to the early 1990s, the EAEU can been identified as a catalyst of economic formalization for the national economy of Kyrgyzstan. Certainly, there were efforts at market integration before 2015 that had made policy adjustments necessary, such as Kyrgyzstan’s 1998 entry into the World Trade Organization. Also, much of how economic exchange operates inside Kyrgyzstan and when goods cross its borders remains decisively dependent on informal agreements (see also Cieslewska, 2014; Fehlings and Karrar, 2020). But in contrast to those times when early post-Soviet transformative markets were depicted as “wildly informal” or “nothing was illegal” (see Hohnen, 2003), clearly EAEU accession has elevated the relevance of codified and written-down regulations for producing and distributing goods both inside and out of Kyrgyzstan to an unprecedented level. Alongside such formalization, one can observe trends of diversification and specialization. When again taking a 30-year perspective, the entrepreneurs portrayed in this chapter were only one recent manifestation of a more diverse market environment across Kyrgyzstan. Earlier manifestations were Kyrgyz middlemen residing in China, the first of whom began facilitating trade deals between Chinese manufacturers and clients from across the former Soviet space after 2005 (Schröder, 2020). Within Eurasian value chains, these middlemen were first indicators of a “servicification” (Miroudot, 2017), which points to an increasing share of value being created by third sector representatives at all stages of input, firm activity and output. From servicification, there is a quite direct line leading to specialization, which for Kyrgyzstan’s economy describes a rather recent demand for knowledge- and skill-based services. The intense exposure to EAEU regulation and competition made it very clear to Kyrgyzstan’s market actors that acquiring specialized expertise of policy experts, market analysts and advertisement consultants was imperative not only to their export competitiveness but even to their in-country sales. One quite tangible outcome of such specialization during my fieldwork were identity-based branding strategies that aspired to unite domestic entrepreneurs and consumers under slogans such as “be loyal, buy local”, or the logo “made in Kyrgyzstan”.

250  The Elgar companion to the Eurasian Economic Union

REFERENCES Abazov, R. (1999). Economic migration in post-Soviet Central Asia: The case of Kyrgyzstan. Post-Communist Economies, 11(2), 237–252. Azarov, A., Maurer, M. K., Weyerhaeuser, H., & Darr, D. (2019). The impact of uncertainty on smallholder farmers’ income in Kyrgyzstan. Journal of Agriculture and Rural Development in the Tropics and Subtropics (JARTS), 120(2), 183–195. Beresford, M. (2021). Rethinking entrepreneurship through distribution: Distributive relations and the reproduction of racialized inequality among South African entrepreneurs. Journal of the Royal Anthropological Institute, 27(1), 108–127. Broka, S., Giertz, A., Christensen, G., Hanif, C., Rasmussen, D., & Rubaiza, R. (2016). Kyrgyz Republic Agricultural Sector Risk Assessment. World Bank Group Report Number 103078-KG. Cieslewska, A. (2014). From shuttle trader to businesswomen: The informal bazaar economy in Kyrgyzstan. In J. Morris & A. Polese (Eds.), The Informal Post-Socialist Economy: Embedded Practices and Livelihoods. New York: Routledge, pp. 121–134. Dergousoff, D. (2017). Kyrgyzstan’s accession to the EEU: Why do apples matter anyway? World Review of Political Economy, 8(2), 203–220. Fehlings, S., & Karrar, H. (2020). Negotiating state and society: The normative informal economies of Central Asia and the Caucasus. Central Asian Survey, 39(1), 1–10. Gereffi, G., & Lee, J. (2012). Why the world suddenly cares about global supply chains. Journal of Supply Chain Management, 48(3), 24–32. Heyat, F. (2002). Women and the culture of entrepreneurship in Soviet and post-Soviet Azerbaijan. In R. Mandel & C. Humphrey (Eds.), Markets and Moralities: Ethnographies of Postsocialism. Oxford: Berg, pp. 19–31. Hohnen, P. (2003). A Market Out of Place? Remaking Economic, Social, and Symbolic Boundaries in Post-Communist Lithuania. Oxford: Oxford University Press. Jenish, N. (2014). Export-driven SME development in Kyrgyzstan: The garment manufacturing sector. University of Central Asia–Institute of Public Policy and Administration (IPPA) Working Paper 26. Kaminski, B., & Mitra, S. (2012). Borderless Bazaars and Regional Integration in Central Asia: Emerging Patterns of Trade and Cross-Border Cooperation. Washington, DC: World Bank. Karrar, H. (2017). Do bazaars die? Notes on failure in the Central Asian bazaar. Working Paper Series on Informal Markets and Trade Working Paper No. 4. Kennedy, J. (2017). Entrepreneurship and limited access: Rethinking business–state relations in Russia. Post-Communist Economies, 29(3), 265–281. Khasanova, S. (2017). Kyrgyzstan and the EAEU: Is the Honeymoon Nearing Its End? Central Asian Analytical Network. https://​caa​-network​.org/​archives/​8331. Kourmanova, A. (2015). Connecting entrepreneurs in Central Asia. Central Asia Policy Brief, 29, 1–18. Miroudot, S. (2017). The servicification of global value chains: Evidence and policy implications. Presented at the UNCTAD Multi-year Expert Meeting on Trade, Services and Development, Geneva. Mogilevskii, R., Abdrazakova, N., Bolotbekova, A., Chalbasova, S., Dzhumaeva, S., & Tilekeyev, K. (2017). The outcomes of 25 years of agricultural reforms in Kyrgyzstan. Leibniz Institute of Agricultural Development in Transition Economies Discussion Paper No. 162. Mogilevsky, R., & Omorova, A. (2011). Assessing development strategies to achieve the MDGs in Asia: Macroeconomic strategies of MDG achievement in the Kyrgyz Republic. CASE Network Report No. 95. Pétric, B. (2015). Where Are All Our Sheep? Kyrgyzstan, a Global Political Arena. New York: Berghahn Books. Rudaz, P. (2017). The state of MSME development in Kyrgyzstan. Working Paper Series on Informal Markets and Trade Working Paper No. 3. Schröder, P. (2018). The economics of translocality: Epistemographic observations from fieldwork in (-between) Russia, China, and Kyrgyzstan. In M. Stephan-Emmrich & P. Schröder (Eds.), Mobilities, Boundaries, and Travelling Ideas: Rethinking Translocality beyond Central Asia and the Caucasus. Cambridge: Open Book Publishers, pp. 263–288. Schröder, P. (2020). Business 2.0: Kyrgyz middlemen in Guangzhou. Central Asian Survey, 39(1), 116–134.

“Made in Kyrgyzstan”: “new entrepreneurs” entering the Eurasian Economic Union  251 Schröder, P. (2021). Trade pioneers, middlemen, new entrepreneurs: Kyrgyzstan’s first capitalists along translocal value chains between “home”, Russia and China. Habilitation thesis, University of Zurich. Schröder, P., & Schröder, E. (2017). Entrepreneurship in Kyrgyzstan: Adjustments to a Changing Economic Environment. Bishkek: Friedrich-Ebert-Stiftung. Spector, R., & Botoeva, A. (2017). New shop owners in old buildings: Spatial politics of the apparel industry in Kyrgyzstan. Post-Soviet Affairs, 33(3), 235–253. Tarr, D. G. (2016). The Eurasian Economic Union of Russia, Belarus, Kazakhstan, Armenia, and the Kyrgyz Republic: Can it succeed where its predecessor failed? Eastern European Economics, 54(1), 1–22. Thomsen, L. (2011). Russian retailers as drivers of global value chains: Examining the conventions of Russian retailers from a Central Asian perspective. Rising Powers and Global Standards Working Paper No. 3. Thomsen, L. (2016). Exporting to Russia? Entry barriers for food suppliers in a territory in transition. Journal of Economic Geography, 16(4), 831–847. Tilekeyev, K., Tokubek uulu, B., & Kirbasheva, D. (2020). The garment sector and youth employment in Kyrgyzstan: A value chain analysis. University of Central Asia–Institute of Public Policy and Administration (IPPA) Working Paper 57. Tiulegenov, M. (2015). A certain path to an uncertain future: Kyrgyzstan’s accession to the Customs Union/Eurasian Economic Union. FES International Policy Analysis. Vinokurov, E., Demidenko, M., Pelipas, I., Tochitskaya, I., Shymanovich, G., Lipin, A., & Movchan, V. (2015). Estimating the Economic Effects of Reducing Non-Tariff Barriers in the EEU. St. Petersburg: Eurasian Development Bank – Centre for Integration Studies. Yoshida, S. (2005). Ethnographic study of privatisation in a Kyrgyz village: Patrilineal kin and independent farmers. Inner Asia, 7(2), 215–247.

18. Conclusion to The Elgar Companion to the Eurasian Economic Union: Eurasian Economic Union at the crossroads Alexander Libman

18.1 INTRODUCTION1 The Eurasian Economic Union’s predecessor, the Customs Union (CU), came into existence when the perception of Eurasian regionalism as purely symbolic and irrelevant for any practical policymaking, was an almost predominant one, in both the scholarly community and among experts. The CU broke this pattern (Dragneva and Wolczuk, 2013; Vinokurov, 2018). Since then, the EAEU has been the topic of intensive debates. The organization was seen as a Russian power project, enhancing Russia’s influence in the region (Wilson, 2017; Sergi, 2018); as a project plagued by contradictions across members vehemently protecting their sovereignty (Roberts and Moshes, 2016; Dragneva and Hartwell, 2021); as a regional development project (Yarashevich, 2021; Eder, 2021); as a counter-hegemonic project contesting the Western political and economic institutions (Kirkham, 2016; Lane and Samokhvalov, 2016; Gürcan, 2020); as an example of authoritarian regionalism (Roberts, 2017; Libman and Obydenkova, 2018; Libman and Vinokurov, 2018; Obydenkova and Libman, 2019; Dragneva and Hartwell, 2022); as a case of non-Western regionalism aiming at transforming the global economy and politics (Johnson and Köstem, 2016; Kaczmarski, 2017; Makarychev, 2018; Pizzolo, 2023); or as a legal order and a set of bureaucratic institutions (Simonyan, 2022; Karliuk, 2023). Some studies treat the EAEU as a case for application of the standard toolbox of comparative regionalism research (Rotaru, 2018; Mukhametdinov, 2020; Braun et al., 2023); for others, it is a project sui generis incompatible with regional institutions in other parts of the world. The goal of this volume was to offer an encompassing view on the EAEU, covering both the details of the history and functioning of the Union and a variety of theoretical perspectives on the organization. In our analysis, we hoped to provide a nuanced picture of the organization rather than stick to a particular interpretation of the EAEU existing in the literature. In doing so, the contributors to this Companion used a variety of disciplinary perspectives (from economics and political science to anthropology and law), examining different aspects of the EAEU, its past experience and its future developments. The Companion thus combined both empirical descriptions and theoretical analyses of the EAEU, macro-level comparative investigations and micro-level studies of how the EAEU affected business activity and migration in the member countries. From this point of view, the Companion aimed to both contribute to academic debates (by serving as a focal point for a rather fragmented literature on the EAEU) and provide a systematic account of the scholarship on the EAEU.

1 The research was funded by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation), project number 444058835.

252

Conclusion  253

18.2

EAEU IN A NUTSHELL

What are the main takeaways of our analysis of the EAEU? To start with, the EAEU is, as opposed to most of its predecessors in the post-Soviet Eurasia, as well as organizations in many other parts of the world, a functioning institution, governed by a large bureaucracy (Chapter 9), with profound impact on trade (Chapter 4), investments (Chapter 6) and migration (Chapter 7). This influence can be observed not only by looking at statistical indicators and economic policymaking: as Chapter 17 shows, it can very well be found in individual business careers and life paths of citizens of the EAEU member states. The fact that the EAEU member states treat their commitments within the EAEU seriously is the main reason why the attention to this organization is warranted: without considering the EAEU, it would be difficult to understand the structure of economic and political relations in post-Soviet Eurasia. The EAEU is, furthermore, more than a geopolitical projection of Russian foreign policy interests and ambitions – smaller states and Eurasian bureaucracy with their interests, as well as unexpected and unforeseen consequences of the policy measures should be taken into account while analyzing the organization (Staeger and Bobocea, 2018; Bolgova and Istomin, 2021). At the same time, presenting the EAEU as an unambiguous success story would be a stretch. On the one hand, the EAEU is plagued by contradictions between member states. This is not unusual for all regional organizations, but in Eurasia these contradictions are exacerbated by several factors. The ideational foundation of the EAEU is vague: there exist multiple concepts of Eurasia, which partly contradict each other and make it hard to formulate a basis for construction of a region (Chapter 2, see also Libman, 2017, 2022a; Izotov and Obydenkova, 2021; Busygina and Filippov, 2021). The EAEU is a highly asymmetric regional organization, with enormous concentration of economic and political power in the hands of its key member – the Russian Federation (Chapter 15). While there are other organizations with even more profound asymmetry (South African Customs Union, former North American Free Trade Area), most functioning regional organizations are less asymmetric; furthermore, Russia’s aggressive foreign policy stance, which the country has followed at least for the last fifteen years (i.e., the entire period of the existence of the EAEU) makes the power asymmetries particularly problematic for smaller members. Finally, the EAEU has from the very beginning been affected by economic sanctions imposed by the EU and the US against Russia and Belarus, as well as Russian counter-sanctions (Chapter 16). These sanctions have made the implementation of the regional integration initiative very difficult. On the other hand, the policy effects of the EAEU are not unambiguous. The declared goals of the organization are associated with liberalization of trade and movement of factors of production; from this point of view, the EAEU follows the “global script” of regionalism set by the EU (Libman, 2019). At the same time, the EAEU is an organization comprised of authoritarian states, which use the Union to achieve their goals and eventually to stabilize their regimes (Chapter 14). These goals in practice are often intertwined with the goals of economic liberalization: for example, open markets can be sources of rents which authoritarian leaders can capture and use for cooptation and legitimation of their rule. This, along with the uncertain ideational foundation, makes the analysis of the EAEU particularly difficult: it is hard to navigate multiple perceptions of the organization and partially contradictory outcomes of its functioning. While studying the EAEU, researchers frequently tend to take a “glass half full” or “glass half empty” perspective, citing either successes of the organization (as opposed to its

254  The Elgar companion to the Eurasian Economic Union post-Soviet predecessors; the evolution of the EAEU is discussed in Chapter 3) or its failures (as opposed to the EU, the implicit benchmark the EAEU is often compared with). The practice of regionalism within the EAEU is, however, more complex. It is necessary to look at specific policy fields and specific agreements to identify the particular achievements of the EAEU. Functional markets (Chapter 5) are a good example: regional integration in this area was accompanied by both progress but also failures and inevitable compromises weakening the substance of the agreements. This is, in fact, not unusual – all regional organizations follow such difficult development paths and the EAEU is no exception. To understand the development of the EAEU it is also necessary to look at how it relates to other regional and global organizations relevant for the post-Soviet Eurasia (Libman and Obydenkova, 2022b). In the West, the EAEU and the European Union are in the state of permanent non-cooperation, which originally was a result of conflicting visions for the Eurasian space and mutual misperception (Chapter 10): the war in Ukraine makes any change of the situation highly unlikely. In the East, the EAEU pursued a program of linking the project to the Chinese Belt and Road Initiative (Chapter 11). Here, both sides proclaim their ambition to advance mutual cooperation (the situation did not change after the start of the war) but so far the results are rather limited (a trade facilitation agreement between the EAEU and China). Finally, in the 2010s, the EAEU was occasionally treated as a nucleus of a larger project in “greater Eurasia”, connecting countries in the West and in the East of the continent (Vinokurov and Libman, 2012; Dutkiewicz and Sakwa, 2018). Practically, the EAEU engaged in creating a network of cooperation and free trade agreements with a variety of countries. After the war in Ukraine, any future possibilities of cooperation in greater Eurasia became very limited though (Chapter 13). While the majority of Eurasian regional organizations preceding the EAEU were primarily rhetorical ones, it is still important to position the EAEU as part of a network of post-Soviet regional organizations, which evolved since the collapse of the USSR (Gawrich and Libman, 2021). Individual organizations in this network are affected by the activity of each other; and the member states also use various organizations to achieve a variety of goals (Chapter 12). The EAEU is closely linked to two specialized regional financial institutions: the Eurasian Development Bank and the Eurasian Fund for Stabilization and Development (Chapter 8). Looking at these organizations is particularly important – not only to assess the full scope of cooperation in Eurasia, but also because the EDB and EFSD, in turn, are part of a community of regional multilateral institutions across the world. EAEU, EDB and EFSD form the ecological system of regionalism in Eurasia (Vinokurov, 2021). To sum up, it would be highly simplistic to reduce the EAEU to one of the perceptions existing in the literature and in the policy debate. It is a complex entity, developing as a result of interplay of multiple actors (member states, bureaucracies, external players) and evolving over time, experiencing both progress and failure.

18.3

UNCERTAIN FUTURE

The Companion takes a snapshot of the EAEU (and the entire post-Soviet Eurasia) at a moment when the future of this region is highly uncertain (it is in fact to some extent even unclear whether Eurasia as a region will persist on the “mental maps” of the world). The war in Ukraine caused a tectonic shift in relations between post-Soviet countries, with still

Conclusion  255 unclear consequences. In practical terms, it turned out to be an enormous challenge for the Companion.2 While originally the manuscript should have been submitted in summer 2022, the editors and the contributors took a timeout for one year, preparing the final manuscript in summer of 2023. Most chapters have been revised multiple times to reflect the highly dynamic changes in Eurasia, and contain a brief discussion about possible scenarios and development trends of the EAEU. From the analytical point of view, the war created a difficult task of dealing with possible scenarios of the evolution of the EAEU. To start with: as of now, it appears unlikely that the EAEU will be officially disbanded as an international organization. This, however, is hardly an unambiguously positive signal for the Union: it simply reflects the fact that regional and international organizations are highly durable – countries frequently maintain even anachronistic organizations, which outlived their purpose (Vinokurov and Libman, 2017; Eilstrup-Sangiovanni, 2020; Debre and Dijkstra, 2021; Dijkstra and Debre, 2022). However, quite often these organizations continue to exist only on paper or turn into bureaucratic zombies, arenas of regular meetings and summits, which, however, hardly have any policy relevance (Gray, 2018, 2020). For this reason, it is also unlikely that the EAEU members will officially leave the organization: while such a move would provoke a response from Russia, there is an easier option of reducing the degree of compliance with the EAEU norms, turning the organization into another case of rhetorical, or symbolic, regionalism – the type of organizations, which, as mentioned above, dominated post-Soviet Eurasia before the EAEU was created (Libman and Vinokurov, 2012). The main question thus becomes to what extent the EAEU will transform into a primarily rhetorical organization or, on the contrary, will maintain actual policy relevance. It is possible to identify several factors potentially influencing this development, which in turn can be used to derive a number of possible scenarios of the evolution of the EAEU. In what follows, I present a brief summary of these trends and scenarios. They are not mutually exclusive: most likely, the EAEU will exhibit a combination of these trends in different areas of its activity or will oscillate between different directions of development. Moreover, while pointing out the long-term changes in the EAEU, one should not forget that factors influencing the development of the EAEU in the first decade of its existence and discussed throughout the book will remain salient and affect the evolution of the EAEU in the future as well. Still, the subsequent discussion provides some sort of a summary of building blocks, which can be used for thinking about the future of the EAEU and regionalism in post-Soviet Eurasia. 18.3.1 Changing Balance of Powers Between Member States The most obvious consequence of the war in Ukraine, regardless of its future dynamics, appears to be the decreasing influence of Russia in the region. Its economy will be weakened because of sanctions and its foreign policy increasingly dependent on a small number of allies (or at least countries open to engaging in transactions with Russia). Under these con-

2 The author of this chapter started his career at the Institute for Economic and Political Studies of the Russian Academy of Sciences in Moscow, an institution which during the Soviet era focused on studying the COMECON. Thus, he was witness to the development of the careers of scholars, who initially specialized on COMECON and observed how the topic of their investigation vanished before their eyes (partly changing their specialization to study integration processes in the post-Soviet Eurasia). While the EAEU is unlikely to vanish, some parallels seem to be apparent.

256  The Elgar companion to the Eurasian Economic Union ditions, smaller states of the EAEU, which, as mentioned, were quite capable of exercising their agency from the very beginning of the establishment of the organization, could become increasingly important in both the institutions of the EAEU and in informal decision-making practices. As a result, the future development of the EAEU could to a greater extent be influenced by the preferences of smaller countries, in particular Kazakhstan (Belarus is, similarly to Russia, hit by sanctions, and Armenia and Kyrgyzstan suffer from domestic instability and economic problems).3 From the point of view of small states, the key objective is to make sure that the EAEU will remain (in terms of its rhetoric and operations) as unaffected by the war in Ukraine and the prolonged confrontation between Russia and the West as possible. For them, the EAEU, most certainly, should remain an organization with purely economic goals, with boundaries determined by the economic interests and risks of these states. It should refrain from any form of rhetoric, which could be interpreted as taking the Russian side in the conflict with the EU and the US, as well as from broader ambitious initiatives, instead concentrating on specific functional problems the organization is (still) capable of solving. Above all, the EAEU should not constrain the ability of smaller countries to develop economic and political ties with other major players in Eurasia, most importantly, China. The war in Ukraine has massively heightened the awareness of smaller states of the risks associated with excessive dependence on Russia (Libman and Obydenkova, 2022a). Already in the past, they tried to avoid situations when economic and political ties gave Russia too much leverage over them (Libman and Vinokurov, 2018): now they will double the effort. On top of that, they will certainly try to avoid situations when interaction with Russia can trigger secondary sanctions from the US and the EU. At the same time, as long as open borders and cooperation mechanisms in the EAEU produce tangible economic benefits, there are no reasons to expect smaller countries to refrain from using those. Ultimately, it means that the EAEU will develop towards a more rhetorical project, and deepening of integration will certainly be impossible; however, in some areas EAEU is likely to continue as a functioning regional organization. 18.3.2 Securitization and the Russian Political Agenda The war seems to have decreased the attention of Russia to the EAEU. This is driven, first, by the fact that Russia focuses on other arenas and topics, which consume most of the time and attention of its leadership; and second, that Russia prioritizes security and military issues over economic ones. From this point of view, allowing the position of smaller states to prevail in the EAEU may be acceptable (or even attractive) for Russia; this reduces the tensions between Russia and other post-Soviet countries and at the same time allows Russia to present the EAEU as evidence of still persistent Russian influence in the region (and also benefit from rerouting trade flows through the EAEU countries to avoid sanctions, as long as it remains possible). However, it is also possible that instead of this rather pragmatic approach Russia will pursue a more ideological path, attempting to push for greater presence of its political agenda in the EAEU. While it clearly contradicts the interests of smaller states (which makes the realization

3 In case of Armenia, the conflict in Nagorno-Karabakh provides another major source of uncertainties.

Conclusion  257 of this scenario as of now rather unlikely), we cannot exclude the impact of this factor on the future development of the EAEU. Currently Russia attempts to position itself as a leader in the global opposition to the Western dominance. From this point of view, it is likely to be interested in framing all cooperation and integration formats it participates in (including the EAEU) as part of this global anti-hegemonic movement. The most likely realization of this would be a change of the rhetoric of the EAEU officials and institutions (as well as possibly of joint communiqués and decisions of the Union), highlighting the topics relevant for Russia – the unlawful nature of the Western sanctions, the need to protect the sovereignty of the non-Western states and to combat the Western hegemony. Securitization of issues the EAEU deals with would be another likely consequence.4 The EAEU is an economic organization and thus is unable to deal with hard security issues: however, the economic discussions within the EAEU would be more likely to be framed in the language of security and external threats. Somewhat paradoxically, this scenario could lead to an even more intensive transformation of the EAEU into a purely rhetorical organization. First, smaller states, most likely, would accept only rhetorical commitment to Russia’s ideological agenda (as mentioned, most likely, they would do all in their power to avoid it as well). Second, and equally important, the design of the EAEU (an organization “mimicking” the EU in the key elements of its script, including focus on economic issues, liberalization of markets and common rules and norms) makes it very difficult to transform it into an organization fitting the Russian ideological claims. Finally, the EAEU members can engage in rhetoric of joining forces in import substitution and reducing economic dependence on the West, but they do not have the necessary economic and technological potential for such a goal.5 18.3.3 Bureaucracy Muddling Through Yet another perspective on the future of the EAEU can be offered if one looks at the bureaucracy of the EAEU and the Eurasian Economic Commission. The EAEC bureaucrats are likely to play a crucial role in the development of the EAEU if both Russia and smaller states pay limited attention to the organization: in this case determining the actual scope of activities of the EAEU will be left to bureaucrats. If that is the case, the future of the organization could be heavily influenced by bureaucratic inertia. While there are examples of EAEU officials who are known for their vocal public position and political ambitions (and thus could have their own vision of the EAEU), most of them are likely to stick to the formal mandate of the organization. Bureaucratic logic (both generally and in particular authoritarian states of post-Soviet Eurasia) prioritizes the letter of the law and hierarchical thinking and encourages risk-aversion.6

On the concept of securitization and its application to non-democratic states see e.g., Vuori (2008). It is interesting to speculate about the position of Belarus. In terms of its willingness to avoid excessive dependence on Russia, it is similar to other small states of the Union; but in terms of anti-Western rhetoric, it will most likely side with Russia. 6 It can also be the case, of course, that Russian leadership will demand stronger demonstrations of loyalty, which could drive some officials in the EAEU to behave in a more ideological fashion. However, so far the Russian leadership appears to tolerate the existence of technocrats supporting the regime in the area of economic policy (which is, in fact, one of the reasons for Russia’s resilience to sanctions). On 4 5

258  The Elgar companion to the Eurasian Economic Union If that is the case, one would in the future observe very little change in the work of the EAEU as opposed to the pre-war situation. The EAEU would simply continue as if the war had not happened (Libman, 2023), pursuing the same agenda of market liberalization and integration of functional markets. The language of the EAEC decisions and the agenda suggested by the bureaucracy is likely to be a direct continuation of the goals set before the war. The EAEU institutions will generate a substantial amount of paperwork, and some of it could even be implemented by the member states. Still, over time, given the growing gap between the economic and political situation in Eurasia and the practices of the EAEU, the organization could slide more towards a purely rhetorical one. 18.3.4 Global Economic Changes Finally, the transformation of the EAEU is likely to be part of a general transformation of regionalism and regional governance institutions in the world economy. The war in Ukraine appears to be a critical juncture, determining the new path of global economic development. There is an increasing risk of the world separating itself into competing economic blocs and of a new trend towards deglobalization. Already in the 2010s, the world economy turned into an arena of political competition; the rise of China became the key driving force for what Calder (2012) calls a “new continentalism”: an attempt at constructing an alternative system of economic “rules of the game” for Eurasia. Ironically, the discussions about Eurasian connectivity so popular during this era led to a growing competition of mutually exclusive connectivity projects suggested by various power centers (China, Japan, the US and the EU, but also Russia and India, see Libman and Vinokurov, 2021). Still, during this period the competition happened within the general structure of the globalized global economy, with all key actors remaining highly dependent on global interconnections. Democratic states and authoritarian states profited from being part of global economic networks (e.g., Cooley and Heathershaw, 2017). On top of that, democracies considered economic connectivity to be a key element of potential peaceful transformation of autocracies. The war in Ukraine has led to a new quality of geoeconomic competition. Both European countries and China are now highly concerned that their mutual dependence, which emerged over the last decades, makes them vulnerable to the other side’s use of economic pressure. The EU is now increasingly perceiving common values (but also common geopolitical attitudes) as a necessary prerequisite for international economic cooperation, and expects countries of the Global South to take sides in its competition with authoritarian states – a notion these countries vehemently reject. China does not treat the EU and the US as reliable partners any more, expecting them to use economic statecraft to limit China’s foreign economic influence. As a result, one can easily imagine a future in which the world trade will be concentrated in fragmented economic blocs, connected by their own standards and infrastructure; globalization will slow down or even be reversed (Libman, 2022b). In this case, the role of regional governance institutions is likely to increase substantially. The EAEU could profit from this development (Libman, 2022b). At the same time, as mentioned, the economic and technological potential of the EAEU is limited. At least for the top of that, there are no reasons for bureaucrats from other EAEU countries to behave in an ideological fashion.

Conclusion  259 Central Asian states, and possibly even for Belarus, a crucial partner in the fragmented world is going to be China. China is also likely to remain the major partner and possibly the main source of technological imports for Russia. From this perspective, the development of the EAEU will massively depend on its relations with China and linking to the Belt and Road Initiative. The EAEU could then become part of new (ultimately Sinocentric) regional governance institutions. The alternative would most likely imply the decline in purely rhetorical regionalism.

18.4 CONCLUSION The EAEU thus appears to be at a point of its development, when the turn towards more integration rhetoric and less integration substance appears to be likely.7 At the same time, as mentioned, uncertainty about the EAEU’s future remains high, and the organization is likely to experience unequal development in different policy areas. Understanding this evolution could be a valuable source of information for those studying how regional organizations adapt and adjust to major crises, leading to complete rearrangement of the environment in which they emerged. EAEU evolution is also likely to be an important topic for those interested in understanding the evolution of the states of post-Soviet Eurasia in general. In fact, while the chapters of this Companion provide a highly complex picture of the EAEU, this complexity is precisely the reason why research on the EAEU could contribute to many strands of the scholarly literature. It could inform those studying authoritarian regionalism; the impact of major crises on regional organizations; interaction between nation-building projects and regionalism; as well as highly asymmetric regional integration arrangements. Similarly, the EAEU is relevant for policymakers and practitioners, interested in understanding the dynamics of economic and political ties between Eurasian states. Even the slide into rhetorical regionalism does not necessarily mean that the research on the EAEU will become less important: the entity will most likely continue to attract a lot of public attention and thus remain at the very least an important topic in the political discourse of the Eurasian countries. Summing up, understanding the EAEU is an important task. The snapshot of the EAEU, as it is captured by this Companion, will hopefully encourage future research on this topic.

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Index

Advisory Committee on Migration Policy 130, 171 Agreement on Economic and Trade Cooperation 158–9 Agreement on Economic Union (1993) 165 Agreement on Special Safeguard Measures 52 agriculture goods, EAEU functional markets in 61–6 Alfa-Bank 88 anti-dumping and countervailing measures 53 apartheid sanctions, against South Africa 229 Arab Monetary Fund (AMF) 110, 118 Arab Spring 194 Armenia 233 GDP of 148 member countries of the CIS 112 “new” Russian migrants in 97 Second Karabakh War (2020) 38 security dependence on Russia 38 Armenia–Azerbaijan conflict 21 Second Karabakh War (2020) 38 Asian Development Bank (ADB) 113, 119 Asian Infrastructure Investment Bank 119 Asia’s value and supply chains 184, 186 associate membership, of EAEU 170 Association Agreement (AA) 20, 29–30 Association for Slavic, East European, and Eurasian Studies (ASEEES) 14 Association of Southeast Asian Nations (ASEAN) 85, 157, 179, 183–5, 204 Association of the Russian pharmaceutical manufacturers 70 Astana Treaty 28–30, 37, 48, 59, 147, 149, 204, 217 Atlantic alliance system 33 Atlantic power system 34 authoritarian regionalism 7, 140, 194–7, 205, 252, 253, 259 autocracy 125 Azerbaijan 15, 21, 30, 33–4, 38, 89, 149, 198 Collective Security Treaty (CST) 168 balance of payments 108, 110, 112–15, 120 balance of power, in the Eurasian region 22, 119 Belarus 228 CIS presidency 170 different scales of interactions of the EAEU with 170–72 member countries of the CIS 112

migration-related standoff against the EU 216 Belavezha Accords 27 below the poverty line 100 Belt and Road Initiative (BRI) 6, 35, 157, 199 effects on Eurasian integration 153 emergence of 155 One Belt One Road slogan 158 post-Soviet space used by China as a transit corridor to Europe 157 relation with EAEU 153, 181–2 key features 154 key milestones 154 reconciling the differences 157–9 risks and benefits 159–60 Shanghai summit (2014) 154 shared destiny 155 win-win cooperation 155 Russia’s response to 156, 161 bilateral free trade agreements 53, 144 bilateral investment cooperation between Belarus and Armenia 79 between Belarus and Kazakhstan 79 bilateral loans 111 Board of the Eurasian Economic Commission 171, 202 Borrell, Josep 149 borrowing crisis finance 119 Bretton Woods system 108–9 BRICS countries 110 New Development Bank 204 brotherhood, principle of 199 “Bureaucracy muddles through” scenario 2 Calder, Kent 184, 258 capital turnover 81 Central Asian Corporation Organization 28, 166 “Central Asia–Russia” summit (2022) 22 Central Bank of Russia (CBR) 82 Central Eurasia, notion of 156 Chiang Mai Initiative (CMI) 110 Chiang Mai Initiative Multilateralization (CMIM) 110 China Belt and Road Initiative (BRI) 6, 35 economic expansion 157 influence as a source of trade and investment 183 Maritime Silk Road 37

262

Index  263 production networks 184 railway connection with EU 154 relation with Russia 153 role as principal trade partner 187 Silk Road Economic Belt 36, 155, 158 trade with EAEU 185 Russia 182 vision of globalization 156 regional cooperation 156 China–EAEU–EU container transit 6 clash of integration projects 144 Clinton, Hillary 35 Cold War 13–14, 33, 37–8, 60, 68, 179 East–West confrontation 36 power rebalancing, issue of 68 collective bargaining power 74 Collective Security Treaty (CST) 168 Collective Security Treaty Organization (CSTO) 21, 33, 122, 167, 171, 172, 194 deployment of peacekeepers in response to anti-government unrest 172 different scales of interactions of the EAEU with 170 EAEU’s relations with 171 Russia-led 172 Color Revolutions 193–4 Commission of the Customs Union 29, 200 Commission of the Eurasian Customs Union 29 Common Agricultural Policy 62 common border protection 31 Common Commodity Nomenclature 5, 47 common customs tariff 1, 42 Common Customs Tariff of the Union 47–8, 56, 126 Common Economic Space (CES) 27, 29, 111, 144, 165, 203 creation of 166 Common European Home 37, 179 concept of 20 Gorbachev’s idea of 154 Common External Tariff of the EAEU (CET) 48–52 common market, creation of 59 Commonwealth of Independent States (CIS) 4, 27, 53, 67, 73, 80, 111, 143, 192 Business Centre for Economic Cooperation of 204 Convention on Standards of Democratic Elections, Electoral Rights and Freedoms in Member Nations of 193 different scales of interactions of the EAEU with 170–72

documents (decisions, agreements and declarations) adopted by 169 Economic Court of 168 Executive Committee 170, 204 free trade agreements (FTAs) 31, 168 importance of 166 Inter-Parliamentary Assembly (IPA) of 32, 192 mutual investments in 82 Rules of Origin 53 comparative regionalism 3, 8, 139, 205, 227, 252 competing regionalisms idea of 139 paradigm of 144 Conference on Interaction and Confidence Building Measures in Asia (CICA) 204 consensus-based democracy 199 conservative revolution 16 consumer purchasing power 98 contested neighbourhood 34, 139 Contingent Reserve Agreement (CRA) 110 Council for Mutual Economic Assistance (COMECON) 229 Court of the Eurasian Economic Union (EAEU Court) 128, 131–4 appeals and complaints to 133 Appellate Chamber of 131 Grand Chamber of 131 Rules of Procedure of 131 Statute of 132 COVID-19 pandemic 5, 72, 93, 98, 106, 117, 119, 185, 210 management by the EAEU 216 credit stabilization 112 cross-border economic linkages, in the EAEU 79 cross-border goods exchange 59 cross-border investment 90 currency swaps 109–10, 117, 119–20 customs and tariff regulation, in the EAEU 47–55 exemptions from the common external tariff 48–52 principle of residency 55 rules of origin 53–4 customs information systems 55 Customs Union (CU) 1, 20, 27–30, 28, 30, 41, 59, 62, 64, 67, 147, 157, 167, 230, 252 Commission of 200 Common Customs Tariff of 48 common external tariff (CET) of 42 common foreign trade policy 41 development of 42 for elimination of barriers to mutual trade 41 establishment of 83, 157 South African Customs Union (SACU) 211 Treaty on the Functioning of 56

264  The Elgar companion to the Eurasian Economic Union debt sustainability 115 debt-to-GDP ratio 111 debt vulnerability 111 decision-making, within the EAEU 213 “emergency-break” approach to 219 Deep and Comprehensive Free Trade Area (DCFTA) 20, 29–30, 143 Dialogue of Integrations 204 EAEC Council 128, 130 EAEU law best practices 217–19 interpretation and application of 127 provisions of 132 rules and regulations of 131 uniform application of 131 EAEU member states changing balance of powers between 255–6 ‘multi-vector policy’ of 149 national competence of 126 political integration of 172 EAEU Treaty Annex II of 219 rules of origin 53 “Third party response” of 52 Ease of Doing Business Ranking 203 East Asian crisis 115 Eastern Bloc 13 Eastern Partnership (EaP) 29–30, 34, 142–4, 149, 155, 159, 180, 199 East–West transport corridors 181 economic and political stabilization 102 economic blockade 229 economic blocs, formation of 108 economic coercion 227 Economic Community of West African States (Ecowas) 36 Economic Cooperation Organization 228 economic downturn 80 economic governance and crisis management, in EAEU 215–17 economic integration, concept of 41–2 economic liberalization 20, 213, 215, 253 economic sanctions, against Russia 80, 88, 173, 227, 253 due to Crimean crisis 230–32 due to war in Ukraine responses of the EAEU 235–7 sanctions-breaking through the EAEU 232–5 economic slowdown driven by 229 effect on EAEU 228, 230–37 economic regionalism 227, 228–30

expulsion of Russian banks from the international payment systems 232 imposed by the EU and the US 232, 253 and Russian counter-sanctions 230–32 against individuals and companies from Ukraine 230 SWIFT sanctions 227, 232 economic slowdown 227, 228, 232 sanctions-driven 229 economic stabilization 92 educational diplomas, mutual recognition of 103 educational migration 103 expansion of 103 EFSD Council 113 emerging market economies 111–12 emigration, outside the EAEU 102–6 employment contract 101, 127 energy “chains” 74 energy goods, EAEU functional markets in 66–70 energy politics 68 energy pricing mechanisms, issue of subsidies in 68 energy superpower 69 ethnic homelands 95 ethnic succession 95 ethnofederalism 17 etnos 16 EU–EAEU relations antagonisms in 143–6 fault lines in 138–9 interaction and future outlook 146–9 issues of incompatibility 147 key themes and views 138–40 until February 2022 142–3 Eurasia agroindustrial policy 63 constructivist notion of 19 defined 13 development of investment cooperation in 79 energy integration 66 as essentialist space 15–19 future of 22–3 geographic concept of 13–15 as a geopolitical space for cooperation or conflict 19–21 inter-organizational relations (IO–IO relations) in 163–5 two visions for 154–7 Eurasian Anti-Crisis Fund (ACF) 110, 112 Eurasian bureaucracy 253 “Eurasian Conformity” mark (EAC) 248 Eurasian Customs Union (EACU) 28–9, 42, 139, 142 Eurasian Development Bank (EDB) 80, 93, 111, 112, 118, 148, 197, 254

Index  265 assessment of mutual investments 82 assessments on investments towards Russia 82 capital shares’ distribution 120 mutual investments data 82–3 Eurasian Economic Commission (EAEC) 1, 29, 32, 62, 70, 122, 128, 141, 153, 159, 170, 171, 192, 235 Eurasian Economic Community (EurAsEC) 4, 27–30, 122, 131, 165–7 Arbitration Court 28 Customs Code 29 Customs Union Commission 131 economic integration during the early 2000s 167 establishment of 166 liquidation of 112 “multi-vector” policies 167 Uzbekistan’s decision to join 166 Eurasian Economic Forum 202 Organizing Committee of 201 Eurasian Economic Union (EAEU) 1–4, 21, 27, 30–33, 41, 70, 123, 141, 154, 159, 192, 252 Agreement on the transportability of pensions 5 commodity exports to third countries 46 commodity structure of mutual trade 44 Common Customs Tariff of 56 Common External Tariff of 41, 49, 52, 55, 57 comparison of external and mutual trade volumes 45 contribution of Eurasian integration to the growth of mutual trade in 45 cooperation and conjugation with BRI 37 for creation of single market 42 Customs Code of 5, 47 data 8–10 decision-making bodies 1 duality of legal regulation in 133 economic side of regime-boosting 199–204 effects of sanctions on 228, 230–37 EFSD in 111–12 establishment of 122, 167 external relation with the EU and China and on Russia 178 external trade 46 fate after the Ukraine war 187–9 functional markets in the making agriculture goods 61–6 energy goods 66–70 medicinal and medical products 70–73 globalization of 204

“global script” of regionalism set by the EU 253 ideational foundation of 253 importance of 1 integration process of 208 internal trade among member states 42–6 international legal obligations of 48 Kazakhstan’s idea of creating 29 literature on 3–4 merchandise exports to third countries 46 mutual trade in agriculture commodities 65 goods (intra-regional exports) 43 normative framework 64 in a nutshell 253–4 obligations of member states 47 output and employment in 2015–2019 65 policy harmonization and economic integration 8 Protocol 24 on coordination of transport provision 67 relation with BRI 6 role in foreign economic policy 3 significance of 35–8 “Strategy – 2025” 134 structural characteristics of 7 success of economic cooperation in 81 supranational intentions and sovereign realities 68 Supreme Eurasian Economic Council 32 Eurasian Fund for Stabilization and Development (EFSD) 5, 110, 254 balance of payments finance 115 capital structure 113 credit disbursement 117 decision-making structure of 114 defined 112 economic regionalization 108 in Eurasian Economic Union 111–12 lending capacity per country 116 lending conditions 115 literature review 108–11 mechanics of 112–15 as part of the GFSN 115–18 regional financing arrangement 111 sustainable crisis finance 119 Eurasian Group on Combating Money Laundering and Terrorist Financing (EAG) 171 Eurasian integration concept of 14 contribution to the growth of EAEU mutual trade 45 scholarship on 60

266  The Elgar companion to the Eurasian Economic Union Eurasian Intergovernmental Council 6, 32, 122, 128, 130, 202 Eurasianism doctrine of 145 features of 17 Eurasian Parliament 32 Eurasian regional integration 3, 119, 139 Eurasian regionalism 2, 123, 252 EAEU’s search for a position in 167–72 effect of economic sanctions on 228–30 goals of 111 prior to the foundation of the EAEU Commonwealth of Independent States (CIS) 165 Eurasian Economic Community (EurAsEC) 165–7 Eurasian region-building 139 Eurasian Single Economic Space 62 Eurasian transport corridor 166 Eurasian Union (EaU) 2–4, 20, 22, 27, 30–31, 122, 138, 141, 145, 157, 172 Euro-Asian integration projects 28 Euro-Islam 17 European Atomic Energy Community 67 European Bank for Reconstruction and Development 112, 113, 203 European Commission 32, 62, 124, 130, 140–41, 143, 148 European Community of Steel and Coal 28, 67 European Council 140, 149 European Economic Community 62, 67 European integration processes 154 European Neighbourhood Policy (ENP) 142, 143 European Union (EU) 14, 59, 85 Association Agreements with Georgia, Moldova and Ukraine 199 balance of payments 113 Common Agricultural Policy 62 Eastern Partnership (EaP) 29, 34 Eastern Partnership programme 159 expansion of 20 exports of consumer electronics to Eurasian countries 233 idea of 22 national registers 71 principled pragmatism and resilience 149 railway connection with China 154 recognition of the sovereign right of states 147 relations with EAEU 138 EU–Russian relations diplomatic relations 181 Strategic Partnership 144 summit of June 2012 142

financial credits 114–17 Food and Agriculture Organization (FAO) of the United Nations 62 foreign exchange (FX) reserves 109 former Soviet Union (FSU) 14, 16, 93, 123, 165, 166, 249 Founding Treaty (FT) of EAEU (2014) 66, 69 Article 4 of 59 Article 28 “Internal market” 61 section XXV of 61 signing of 59 free movement of goods 27, 29–30, 41, 122, 126, 240 free-riding cooperation 212 free trade area (FTA) agreement 29, 42 Russia–EU free trade agreement 180 free trade, principle of 233 Free Trade Zone 29, 53, 166 functional markets 5, 59–61, 63–4, 66, 70–73, 74, 254, 258 General Agreement on Tariffs and Trade (GATT) 52 Georgia 15, 30, 34, 63, 88, 143, 159, 166, 168, 193, 199 Collective Security Treaty (CST) 168 Germany 2, 14, 92, 97, 102, 132, 146, 157, 230, 245, 247 economic ties with Belarus and Russia 29 energy policy 182 institutional life 210 reunification of 20 success as Euro-hegemon 210 global economic changes 258–9 global economic crisis 122 global economy 73, 111, 126, 158, 160, 184, 231, 252, 258 global financial crisis 5, 60, 83, 108–10, 112, 115 global financial safety net (GFSN) 6, 108, 119 definition of 110 EFSD as part of 115–18 global financial volatility 110 globalization, age of 38 global monetary and financial system 108 Global North 96, 102–3 global payment infrastructure 227 global production networks 187 global-regional divides 163 global safety net 117 Global South 106, 202, 258 GMP (good manufacturing practice) certificates 71 good-governance guarantees and reforms 196 Gorbachev, Mikhail 37

Index  267 idea of the ‘common European home’ 20, 37, 154, 179 governing bodies, of EAEU 128–31 Greater Eurasia 186 Chinese export to 183 EU export to 183 and the gravitational shift from West to East 183–4 and Greater Eurasia Partnership 178–9 idea of 22, 154–6, 159, 177, 179 from Lisbon to Vladivostok 179–80 origin and purpose of 178–9 post-Soviet integration and the EAEU 180 Greater Eurasian Partnership (GEP) 7, 37, 157, 159, 177, 201 EAEU trade agreements beyond China 184–6 economic and geopolitical limits of 186–7 fate after the Ukraine war 187–9 Greater Eurasia and 178–9 implementation of 184–6 political idea of 178 relation with EAEU and China’s Belt and Road Initiative 181–2 Greater Europe 30, 35, 37, 144, 154, 179–80, 181 Great Russian nationalism 16 green agenda 200 green economy 5, 134 Gulf Cooperation Council (GCC) 7 GUUAM, creation of 166 Higher Eurasian Economic Council (HEEC) 170 human capital 203 human rights violations 201, 227 hydrocarbon-related revenues, in Russia 69 imitating regionalism 124 informal economy 94, 98 information exchange 55, 61, 170 institutional design, of the EAEU 140 institutional framework, of EAEU 217–19 institutional “pseudomorphism” 195 Integrated Information System (IIS) 56 integration dilemma 144 integration without liberalization 203 inter-country relationships, securitization of 22 Intergovernmental Council 1, 6, 122, 127, 129–30, 200, 202, 218 International Economic Forum 178 International Monetary Fund (IMF) 109, 112, 113, 184 lending capacity per country 116 Stand-By Arrangement 117 International Organization for Migration (IOM) 99

international organizations (IOs) 6 inter-organizational cooperation 170 inter-organizational relations (IO–IO relations) cooperative rivalry 163 in Eurasia 163–5, 173 interplay and interaction 164 organizational interplay 164 Interstate Council 28 intra-elite conflicts 33 intra-regional cooperation 80 investment loans 114–15, 120 Izvestiia (Russian newspaper) 18, 180 Kazakhstan 188, 217, 233–4 Customs Union 123 as EAEU’s second largest economy 148 ethnic Russians’ share 96 GDP of 148 member countries of the CIS 112 “new” Russian migrants in 97 sovereignty and independence 145 Xi Jinping visit to 153 Kovalev, Vladimir 202 Kravchuk, Leonid 27 Kudrin, Alexei 112 Kyrgyzstan 230, 234 accession to the World Trade Organization 167, 249 agro-businesses in 248 apparel industry 241 average income 92 GDP of 148 Igor’s paper company 245 industrial revival in 244 labor migrant diasporas in Russia 93 labor migrants in Russia 240 levels of female migrant employment 101 loans and service sector integration 243–6 localization of capital 241–3 as member countries of the CIS 112 membership in the EAEU 240, 242 National Statistics Committee 100 “new” Russian migrants in 97 poverty in 100 RKDF loan 244 “self-sewing” sector (samoposhiv) 242 as source of labor migrants 92 standardization and government neglect 246–8 “Tekstil Trans” project 245–6 labor market 92 dynamics of 93–4 regulation of 128 labor migration 92–3

268  The Elgar companion to the Eurasian Economic Union countries of origin 10 domestic migration 95 within the EAEU 94–7 emigration outside the EAEU 102–6 employment contract 101 expansion of 203 impact of COVID pandemic 98 war in Ukraine 98 international 97, 100 International Organization for Migration (IOM) 99 movement of ethnic Russians and Russian-speakers 95 regional migration, dynamics of 97–101 remittances 100 to Russia 96–7, 101 trend of “Western shift” 94 Latin American Reserve Fund (FLAR) 110, 118 least-developed countries 126 liberal-cooperative practices, use of 146 limited sovereignty, principle of 147 Lukashenko, Alexander 18, 22 Mackinder, Halford 20 macroeconomic stabilization 109 Malkina, Iya 235 maritime Eurasia 179 Maritime Silk Road 37 market liberalization 229, 258 Marshall, Alfred 75 medical equipment market 72 medicinal and medical products, EAEU functional markets in 70–73 medicinal market, in EAEU 72 Medvedev, Dmitry 156, 231 Memorandum of Understanding (MoU) 37, 171, 185, 204 MERCOSUR 7, 85, 210 “Middle East” region 15 Minsk summit (2001) 28 Mir (card payment system) 232 Mishustin, Mikhail 202 Mitrany, David 35 Mongol-Tatar invasion 17 Monitoring of Mutual Investments (MMI) database 82 “most favoured nation” status 126 movement of capital, liberalization of 93 multilateral development banks (MDBs) 117 Multilateral Trading System 48, 56, 203 mutual energy exchange, principles of 66 mutual foreign direct investments (FDIs) 79 data and methodology for study of 81–3 in different economic blocs 85

of EAEU member states 81 in financial sector 87 growth of 88–9 literature review of 79–81 outlook of 88–90 post-crisis recovery after the global financial crisis of 2007–2008 83 reduction of 88 sectoral structure of 86 share of Russia in 87 stock in global comparison 84–5 of CIS and EAEU countries 84 trends in domination of Russian TNCs 87–8 extractive industries as the main investment targets 86–7 long-term dynamics 83–4 strengthening competitiveness 88 unbalanced mutual FDI flows 85–6 mutual payments, for goods within EAEU 43 Myasnikovich, Mikhail 125, 202, 218, 235 Nagorno-Karabakh conflict 214 national economies, competitiveness of 111, 126 Nazarbayev, Nursultan 18, 27, 122, 145 Nazarenko, Viktor 70 neighbourhood effect 86 New Development Bank 110 Newly Independent States 192 non-intervention, principles of 193 “non-liberal” Europe, idea of 179 Non-Preferential Rules of Origin 47, 53 non-tariff barriers to trade (NTBs) 185, 248 non-tariff restrictions, proliferation of 64 non-Western regionalism 252 Nord Stream 2 Pipeline Project (Germany and Russia) 181–2 North American Free Trade Agreement (NAFTA) 7, 211 North Atlantic Treaty Organization (NATO) 14, 21 Opinion on Professional Athletes 218 Orange Revolution (2004) 20, 29 organic democracy, idea of 199 Organization for Security and Co-operation in Europe (OSCE) 192 Office for Democratic Institutions and Human Rights (ODIHR) 193 Pankin, Alexander 202 “parallel imports” scheme 203 parliamentary democracy 16 People’s Bank of China (PBOC) 117 people’s organic unity, idea of 199

Index  269 people’s republics 30 pharmaceuticals exchange, in EAEU 60 political economy 60, 64, 68, 74 political neutrality, principle of 193 political sphere, of EAEU 212–15 political/symbolic resources, redistribution of 195 popular sovereignty, idea of 199 populist convergence, notion of 198 Populist Internationale 198 post-Soviet free trade arrangements 69 post-Soviet regional cooperation, institutionalization of 111 post-Soviet regional integration 7, 192, 195 post-Soviet regionalism 177, 192–3, 195–7, 200–201, 204–5 and the making of populist alignments 197–9 power imbalances, within the EAEU 208 future scenarios of 219–20 and institutionalization of social relations 209 literature review on 209–12 power industry 66, 128 power politics 146, 154–6 power rebalancing, issue of 68, 188 principal–agent problem 124 Protocol on Agricultural State Support Measures 62 Putin, Vladimir 18, 35, 104, 138, 156, 172, 178, 199 joint declaration with President Xi 181 proposal of Eurasian Union 157 Russia–EU free trade agreement 180 radicalization and violent extremism 196 “regime-boosting” regionalism 193 Regional Comprehensive Economic Partnership (RCEP) agreement (2022) 184 regional cooperation 108 Chinese vision of 156 Russian vision of 155 regional currency swap framework 110 regional economic blocs 36 regional economic cooperation, in the EAEU 88 regional economic organizations (REOs) 1–2, 31 regional financial arrangements (RFAs) 108, 118 governance mechanisms of 108 regional institution-building 200 regional integration projects 33–5, 38, 142 regional migration, dynamics of 97–101 regional organization 35 dimension of non-liberal orders 194–7 proliferation of 192 regional world order 179

registration certificates, of the EAEU member states 127 reindustrialization 74 representation, idea of 199 residency, principle of 55 Revolution of Dignity 20 “Romano-Germanic” Western civilization 16 Rome, Treaty of (1957) 67 Rosatom 87 Rospotrebnadzor 63 Rosselkhoznadzor 63 Rules of Origin 53 coverage of 54 harmonization of 56 Russia–EU free trade agreement 180 Russian citizens, emigration of 99 Russian colonialism 17 Russian Empire 18 collapse of 16 Russian-Eurasian civilization 18 Russian Federation (RF) ambiguity in its relations with Europe 180 annexation of Crimea 20, 30, 144, 201 Donetsk and Luhansk 214 Armenia’s security dependence on 38 banning of food imports from the EU and the US 230 ban on the supply of its grain to the EAEU countries 131 capacity to maintain economic influence 156 Central Bank of 82 cheap oil supplies 37 China’s trade with 182 citizens of poorer EAEU states working in 148 concept of the Greater Eurasian Partnership (Greater Eurasia) 153 conflicts with the West 232 Constitution of 132 counter-sanctions against the West 145, 253 different scales of interactions of the EAEU with 170–72 economic and industrial isolation 188 EDB’s assessments on investments towards 82 empire-building tradition 34 energy politics 68 Eurasianist ideologies 22 expulsion of Russian banks from the international payment systems 232 foreign policy 180, 229–30 GDP of 148 geostrategic agenda 139 global natural gas output 68

270  The Elgar companion to the Eurasian Economic Union great-power status 155 hydrocarbon production 68 hydrocarbon-related revenues 69 Imperial borders 16 infrastructure cooperation with Germany 182 IOM’s Office in 100 as member countries of the CIS 112 migrant-intensive sectors in labor market 99 military invasion of Ukraine 20, 22, 99, 114, 138, 147, 160–61, 188, 216 nationalism 15 net migration inflow 95 Nord Stream 2 Pipeline Project 181–2 oil and gas exports to China 184 India 187 outward FDI (OFDI) growth rate 80 “parallel imports” scheme 203 pivot to Asia 178 political agenda 256–7 political alienation from the West 33 political use of its energy 67 position in EAEC 124 post-Soviet space 160 post-communist political economy 68 R&D dynamics 103 relations with China 153 Western countries 139 “Response measures” of the Federal Law 52 response to BRI 156, 161 Western sanctions 202 return migration of ethnic Russians to 96 role as an educational migration hub 103 role in the elite migration chain 103 sanctions against individuals and companies from Ukraine 230 share in mutual investment in the EAEU 87 State Duma 166 tariff concessions 48 tension with Global North countries 96 vision of regional order 154 Western sanctions imposed against 88, 173, 227, 253 Russian-Kyrgyz Development Fund (RKDF) 244 Russian pharmacopeia 71 Russian Railways (RZhD) 161 Russian revolution 20 Russian TNCs, domination of 87–8 safety nets 6, 80, 108–9, 117 Savitsky, Pyotr 16 Sberbank 88

Schuman Declaration (1950) 74 Shanghai Cooperation Organization (SCO) 157–8, 171, 192–3 Foreign Ministers Council of 193 Shoigu, Sergei 104 Silk Road Economic Belt (SREB) 36, 153, 155, 158 single customs territory 57, 167 Single Economic Space (SES) agreement (2011) 1, 18, 20, 122, 167 Single Eurasian Sky programme 33 Single European Act (1986) 28 social regulation, method of 199 social security 203 South African Customs Union (SACU) 7, 228 South African Development Community (SADC) group 211 South Asian Association for Regional Cooperation 110 South–South trade 108 sovereign democracy, idea of 198 sovereign republics 68 Soviet Union disintegration of 27, 67, 72, 92, 95, 163, 254 ethno-federal policies 95 spatial-dependence hypothesis 19 state–institutional balance 127 state-owned corporations 88, 90 state-owned enterprises 157 St. Petersburg Economic Forum 156 St. Petersburg International Legal Forum 202 Strategic Directions for the Development of Eurasian Economic Integration until 2025 (2020) 56, 134 supracontinental unity 14 supranational bureaucracy 124 Supreme Eurasian Economic Council (SEEC) 66, 70, 122, 124, 128, 130, 140, 201 Surkov, Vladislav 198 sustainable crisis finance 119 sustainable development 75, 81 sustainable economic development 59, 126 SWIFT sanctions 227, 232 Tajikistan 5, 15, 21–2, 27–8, 31, 33, 92–3, 97, 100–101, 106 as member countries of the CIS 112 tariff activism 64 tariff-based custom duties 172 technology-based economy 186 technology transfer 147 “Tekstil Trans” project 245–6 trade disputes, involving dairy products 64 trade liberalization 147 principles of 30

Index  271 transnational corporations (TNCs) 86, 105 Russian TNCs 87 transnational organized crime 171 Treaty on the Creation of the Common Customs Territory and Establishment of the Customs Union (CU) 122 Treaty on the Eurasian Economic Union (2015) 1, 6, 122, 126–8, 132–3 Annex 1 of 200 section IX of 126 Treaty on the Functioning of the Customs Union 48 Trump, Donald 211 Turkic heritage, in Eurasia 17 Ukraine Association Agreement with the EU 20, 230 consensus on joining the EU and NATO 21 pro-European Union orientation of 21 Russian military invasion of 20, 22, 114, 138, 147, 160–61, 188, 216 UNASUR project 210 UNCTADStat 72 UN General Assembly 148, 178 unified customs system 28 Union State of Russia and Belarus (USRB) 172 United Transport and Logistics Company (UTLC) 157

utopian political program 17 Uzbekistan Collective Security Treaty (CST) 168 decision to join the EurAsEC 166 observer status in the EAEU 38 Valdai Club 156 Value Chains Transformation and Transport Reconnection in Eurasia (2021) 177–8 “Warsaw Pact” countries 13, 20 Western democratizing practices 198 Western sanctions, imposed against Russia 88 wild capitalism 240 working-age people 100 Work without Borders 33 World Bank 69, 100, 113 World Trade Organization (WTO) 20, 28, 48, 61 Kyrgyzstan’s accession to 167 Party’s Protocol of Accession to 48 Xi Jinping 36, 155–6 visit to Kazakhstan 153 Yanukovych, Viktor 20, 29–30, 144 Youngs, Richard 146