The Development of the Eurasian Economic Union

Although the historians tend to call this world global, it is still largely divided based on economic and political principles. As countries react to the changing world situation, they seek for ways to strengthen the cooperation for the purposes of economic benefits, as well as political influence and stability. As a result, countries in Europe decided to organize themselves in the European Union, and the countries in Eurasia focused on forming something on their own. Eurasian Economic Union that now consists of Russia, Kazakhstan, Armenia, and Belarus turned out as a result of the agreements between the states in Eurasia that used to be the members of the USSR and created a sort of opposition to the EU states.

The idea of the Eurasian Union is not new, since immediately after the fall of Soviet Union, post-Soviet countries started to think about ways to strengthen their weak economies by cooperating. The fact that the economy of the USSR involved many factories and plants in different parts of the Union only added to that because various independent states had plants that were supposed to work together. Thus, after the creation of the Commonwealth of the Independent States in 1991 that involved the mentioned above states of Russia, Kazakhstan, and Belarus, it was a matter of time for something like Eurasian Union to be considered as an idea for economic development. It is also important to mention that at that time, the European countries started a process of involving new members and strengthening the positions of the European Union, and the post-Soviet republics felt the urge to keep up and develop on their own.

Nursultan Nazarbayev who has been the president of Kazakhstan from 1991, and led Kazakhstan Soviet Republic from 1989, was the one to propose the formation of the Eurasian Union in 1994. His suggestion was about connecting the economies of post-Soviet countries, occupying large territories of Europe and Asia. According to Nazarbayev, the economic union of now-independent states would be beneficial for their development, as well as simplify the trade and bring more profits to the countries. Besides, it would be a post-Soviet version of the European Union that would enable post-communist republics to keep up, as well as oppose the Western development in some ways.

Nevertheless, the nineties were a complicated decade for the states due to economic crisis after the collapse of USSR’s. Besides, it was more complicated to establish a union with countries that big, unlike the situation in the EU where the countries were relatively similar in size without having giants like Russia and Kazakhstan.

Thus, in the beginning, some states focused on trade agreements and then, formed a Custom Union that enabled them to open the borders between the states, simplifying the trade and migration of the residents.

In 1996, the four states – Russia, Belarus, Kyrgyzstan, and Kazakhstan – signed a Treaty on Increased Integration in the Economic and Humanitarian Fields. It was the first step toward the actual Eurasian Union because the Treaty enabled forming common markets for products, as well as workers who could travel freely; it also spoke of common transportation system and energy and information spheres. Three years later, one more country – Tajikistan joined the group, so five of them signed a Customs Union. The Union enabled the creation of single economic space within the borders of these countries.

The process of forming the Eurasian Union continued in 2000s, with the creation of Eurasian Economic Community. The community consisted of five original members that signed the Customs Union. The community enabled having a common market and was based on the model that already existed among European states that shared common economy.

The free market between Russia, Kazakhstan, and Belarus started functioning in 2010 as a result of the treaties signed by the presidents of these states. Similarly to the EU, the three countries now had no customs for the products and could sell their goods freely, but unlike the EU, the free market did not lead to further political cooperation. In other words, the main aim of the Customs Union was economic cooperation that would integrate economies of the member countries, as well as expand to other post-Soviet states.

The talks regarding the formation of a unique economic union on the territory continued with an agreement signed by the presidents of Russia, Kazakhstan, and Belarus in 2011. With that agreement, the leaders agreed to form Eurasian Economic Union that would start functioning in 2015 and develop a shared economic space.

In order to implement the Eurasian Union formation, the countries formed a Single Economic space that came into action in 2012. As a result, Eurasian Economic Commission was formed, developing the governing branches for the future union. In 2014, Russia’s, Kazakhstan’s, and Belarus’ presidents signed the treaty about implementing the Eurasian Union plan in 2015 with Armenian and Kyrgyzstan presidents being present at the event. With parliamentary approval in the three countries, the treaty came into action, and in the same year, Armenia joined it. Kyrgyzstan also signed the treaty, and in case the existing members approve it, the country will become a member in May of the present year. Henceforth, the Eurasian Economic Union came into action on January 1^st of 2015 with four member states, one country waiting for approval, and some potential members like Tajikistan.

When it comes to the objectives of the Eurasian Economic Union, they are focused on economic development. The leaders of the member states often emphasized on the economic aspect being the main reason for forming the union in the first place, and they also added that the union had no political motives behind it, so member states could not influence domestic or international politics of other members.

The objective of the Eurasian Economic Union is to create a convergent market with an international executive organ monitoring economic operations within member states. Hence, EU aims to develop a strong common market for products and services, and also aims to ensure the free labor movement. With a single market among the three countries (Russia, Kazakhstan, and Belarus), the countries want to expand their economic growth to other member states, and thus, develop financially to increase their GDP, as well as financial turnout. EEU was created to increase the trade between the member countries, in both import and export. Besides, it was created to guarantee the free migration of employees, as well as free trade.

The other objectives of EEU include the minimization of production costs. As it was mentioned before, the member states carry the legacy of USSR, where the factories were built disproportionally with one plant in one country, and another one that was responsible for a second stage of production process – in another one. With a creation of Eurasian Union, it is possible to reduce the negative effects of such planning, since the transportation, raw materials, and other costs will be minimized. With a faster trade movement, the member states expect to increase competition, as well as lower the prices for the population. They also want to develop various economic spheres that would make them more influential on the world economic market. In order to do that, the member states focused on improving the transportation and communication system with each other, as well as linked many of their economic industries with one another. The member states also aim to work together in the fields of agriculture, energy supply, and industrial development.

Thus, an objective of the EEU is to enable citizens’ movement between member states with national ID cards without the need to provide any international documents; it will also eliminate external tariffs that existed before and create a new external tariff that will be the same for all member states. Besides intensifying the market and increasing the competition, EEU aims to develop a currency that will operate in all of the member states.

It is also important to mention that some members like Russia and Kazakhstan are energy giants with huge amounts of natural gas, oil, and coal resources. With this amount of energy sources, the member states aim to create a common energy market starting with electricity market. The members also want to develop infrastructure, as well as a single air traffic zone. So far, EEU members on the Single Eurasian Sky project which would enable developing hubs connecting different parts of the continent.

As the EEU just started its functioning, it is complicated to determine its impact on the economies of member states. Nevertheless, the previous free trade treaties have had a positive impact on the states that signed them, providing them with better trade conditions and an opportunity to import and export with better prices. So far, some experts are positive about the influence the formation of the EEU will have on its member states, and they speak about a big increase in the GDP of member states. For instance, the EEU may increase the GDP of member states by a quarter in fifteen years. Besides, the EEU will enable the development of a united economic system that may have a positive impact on the education, population growth, and employment sphere. With the EEU covering huge land territories, the member states will have more access to various resources, as well as be able to have a bigger economic influence in the world. As the members of the EEU make up for 15% of the world’s territory, the EEU positions itself as a strong player on the international market.

When it comes to structural features and legal characteristics, many of them have a strong resemblance to the ones found in the European Union, since they were used as examples. The union also has its Economic Commission that is responsible for the legal aspects of current free trade agreements, as well as regulates the international treaties. With headquarters of the Commission in Moscow, it monitors the work of other union branches. The commission consists of many workers from member states who make decisions regarding the Custom Union, economic development, regulation policies, and anti-corruption. The commission consists of two bodies, and the first one is the Supreme Eurasian Economic Council. It consists of the member states’ vice Prime Ministers. The council is the one making the most important decisions regarding the union’s expansions like accepting the new members and managing the commission in general. Besides, it is the one responsible for the budget planning and approval, as well as hiring workers. As for the second body of the commission, it is the board. The board consists of nine members led by the Chairman. The board members are chosen by their respective countries and are granted the positions of federal ministers. They are appointed to monitor the daily operations taking place within the Eurasian Union. As an executive organ, the board members meet on a weekly basis to discuss the functioning of the union, as well as analyze the way treaties are being implemented, etc. Whenever there may be disputes between member countries, board is there to help settle them. The board also connects various departments that exist within the union. As it was mentioned before, people who make up the council and board (and the commission in general) are chosen by the member states based on the proportional principle, in accordance to the population of the respective states. The board members vote on particular issues and the same applies to council members. Thus, the decisions are based on the voting results.

The member states also formed Eurasian Inter-Parliamentary Assembly that may serve as a form of parliament within the union. The assembly is intended to create policies and laws that would later be adopted by the national parliaments of the member states. It is also working toward making the legal systems of the member states match the Eurasian Union requirements, so all the countries have the same trade laws. The Eurasian Union will also have its court starting this year that will solve the disputes unresolved by the commission. The court has judges from all member states and resides in Minsk, the capital of Belarus.

It is also important to add that the Eurasian Union has its own bank, Eurasian Development Bank that is responsible for the budget finances, as well as economic growth of the member states. The bank is the one doing all of the operations by the commission like financing the current projects and providing the commission with the money needed for its operation; it also invests in the Eurasian Union projects carried out in the member states. For instance, the bank has already financed the projects worth of $4.6 billion. The money, in the first place, was given by the member states. Besides financing, the bank also monitors economic and financial development of the member and acceding states, as well as predicts the possible profits and losses of the Eurasian Union. As the member states want to establish one currency, the bank is the one developing it.

Despite the big potential, Eurasian Union members speak about the fact that there are many challenges that await the union. Since it has just started to function, it is yet unclear what the results may be, but even now, the existence of the union has received much criticism and skepticism from the experts.

Firstly, the critics point out to the legal challenges that may take place within the union. As the executive organ is located in Moscow, it is responsible for settling minor disputes within the union borders. Nevertheless, with Russia being the biggest member with the greatest amount of natural, financial, and human resources, there is a threat that it may dominate other member states. Besides, with the court residing in Minsk, it is unclear what sort of cases it will be responsible for, and how the disputes will be settled. Experts point out that there is also a danger of Russian side, ignoring the court’s decision, as well as international agreements, as it may be seen with the example of Ukraine and the war that currently takes place in the Eastern part of this country with Russians backing up separatist groups who fight against Ukrainian army.

Also, as it was mentioned before, the sits in the commision are given in proportion to the population of member states. Thus, 84% of positions are given to Russians, and the rest is given to representatives of other states. In such a situation, it is impossible to have a fair evaluation of things and effective decision-making process, since the Russian group dominates, and that may cause internal conflicts between member states.

Besides, another complication is a slow adaptation of countries’ legal and other systems to the existing laws within the Eurasian Union. In case member states want to integrate into a free trade zone fully, they will have to follow the laws and principles of the union, and with this process not working properly, it is impossible to speak about profits and achievements for the members.

When speaking about the Eurasian Union, it is also important to keep in mind that it is formed out of the states that used to be in the USSR. Besides close connections due to similar history, these countries have more things in common. Firstly, all of them are far from being developed, and they are far behind European states. Thus, the union will not be as effective and beneficial as European analogue due to economic problems of Eurasian member states.

Secondly, all member states, as well as potential ones, lack political freedom, and economy in these countries is closely tied to the political regime. In other words, political authorities are the ones influencing big businesses and making the main decisions regarding their development, so the economies of these countries are very regulated, and they do not have an actual free and competitive market due to political pressure. As the presidents of these countries have the power to influence business development in accordance to particular political gains, it is difficult for a European analogue to develop successfully in such complicated economic conditions with politics determining everything. The countries like Belarus or Russia do not have democratic mechanisms like the states in Europe, and also possess underdeveloped legal culture, so it is difficult to develop economy in such conditions.

Although the members of the Eurasian Union speak about economic cooperation only, many experts believe that the Eurasian Union is mostly about politics. Taking into consideration the current Russia’s international politics, such as the conflict with Ukraine, as well as sanctions imposed on country by the Western world, it appears that the Russian authorities have no intentions of following international laws, so it may use the Eurasian Union as a political tool for world influence. As the president of Russia Vladimir Putin has spoken many times about the legacy of the USSR, many critics fear that the Eurasian Union is nothing but a way to restore it. Russia, as the biggest and the most influential country in the union, may simply use it as a tool to influence other member states and turn them into its satellites. Besides, it is important to note that many post-Soviet republics still have many dependencies on Russia, so it may use this fact as a key to turn economic union into a political one.

Also, the aggressive international politics of Russia now has negative impact on the economy of the entire Eurasian Union. With sanctions hitting its biggest member, they are to slow down Russian economy greatly, and this, in result, will have negative consequences for all member states that have trade deals with Russia.

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