Despite Ukraine Crisis, Russia Pursues Eurasian Integration Dream

(RFE/RL – rferl.org – Robert Coalson – May 28, 2014) It’s full steam ahead for the Moscow-backed Eurasian Economic Union — even as its prospective members express serious reservations.

At the May 29 summit of Russia, Belarus, and Kazakhstan in Astana, the three are expected to sign a treaty to transform their tripartite Customs Union into a Eurasian Economic Union (EES) by January 2015.

And as the bloc grows deeper, it is simultaneously growing broader with Armenia and Kyrgyzstan pushing forward with road maps to join as well.

But in the wake of the Ukraine crisis, which has demonstrated Moscow’s readiness to intervene in the internal affairs of its neighbors, there is increasing apprehension as the signing approaches. That apprehension was already apparent when the three Customs Union leaders met in Minsk last month.

“In the run-up to the [Minsk] summit, the very clear pronouncement that there should be more economics and less politics in the Eurasian Union shows that they are trying to drag out the negotiating process as long as possible,” Minsk-based political analyst Yury Chausov says.

“The Eurasian Union was previously viewed as just a platform for achieving compromises,” Chausov continues. “But now, after the events in Ukraine, it is becoming clear that it is not just a ‘common space for the movement of goods and services’ but might turn into a ‘common space for the movement of little green men or polite people’ [both expressions refer to suspected Russian agents or mercenaries prompting unrest in Ukraine] or, in general, a common space with a high potential for generating conflicts.”

The Moscow-driven project has been seen as a part of Russia’s bid to reestablish its political domination of the post-Soviet space, driven more by Moscow’s political ambitions than by economic imperatives.

“It is obviously a political project,” says Nicu Popescu, a senior analyst with the European Union’s Institute for Security Studies (ISS) and co-author of a recent report on the EES. “The economics are pretty unclear.”

“Russia sees itself as a political and geopolitical pole in global affairs and its project of having allies in the post-Soviet space is not just an economic one,” he adds. “Obviously Russia would like this to work economically but if it doesn’t, the strategic and political imperatives outweigh for Russia the economic costs of this union.”

Aleksandr Lukin, deputy director of the Russian Foreign Ministry’s Diplomatic Academy, wrote recently that the EES is “an independent power center in Eurasia” and that “although economic considerations are important, they are also secondary to a set of values differing from those preached by the West.”

In The Shadow Of Ukraine

Moscow has been pushing hard for the EES treaty to be signed this spring for some time now, long before the crisis erupted in Ukraine. Moscow’s haste to ink the agreement seems to have no economic motivation, but rather reflects Russia’s timetable for reintegrating the post-Soviet space.

Nonetheless, events in Ukraine have shaken the tripartite bloc and made both Belarus and Kazakhstan wary of deeper integration with Russia, says Minsk-based political analyst Yury Chausov. The three leaders had a fairly rocky summit in Minsk in April at which both Belarusian President Alyaksandr Lukashenka and Kazakh President Nursultan Nazarbaev hinted that the bloc was moving too quickly.

As a result, the treaty to be signed in Astana is full of gaps at key places.

“What is interesting is that they have left a lot of stuff to be determined in annexes,” says Rilka Dragneva-Lewers, a professor at the University of Birmingham Law School who studies Eurasian integration. “Also what is very interesting is that over the course of the negotiations any mention of supranational elements like the Eurasian Parliament were removed, which was clearly under Nazarbaev’s and Kazakhstan’s insistence.”

It remains to be seen, however, whether those plans are off the table or merely on hold, as Russia maintains powerful political and economic levers over its junior partners.

The Economics Of The Union

Although the Customs Union has been in effect since January 2010, its economic impact on the member states is difficult to judge. Trade among the partners grew initially, but analysts attribute that growth to the recovery from the global financial crisis of 2008-09.

The Eurasian Economic Commission reported last week, however, that trade among the three countries fell by nearly 13 percent in the first quarter of 2014 compared to the same period in 2013.

The bloc’s junior partners have long complained that Russia has failed to fully open its markets, despite the Customs Union. At the end of 2013, Belarusian Prime Minister Uladzimir Semashko said Russia had restricted the import of Belarusian agricultural machinery, contributing to his country’s 2 percent decline in manufacturing. He said Belarus is too tightly tied to the Customs Union and urged development of trade relations with other foreign markets.

Kazakhstan also complains that Russia has not opened its markets.

“A lot of businesspeople are complaining that exports to Russia — despite the Customs Union — are strictly limited,” says Almaty businessman Altai Sandybaev. “Particularly alcohol. People are always complaining about this, but nothing changes.”

He says pledges of access to lucrative Russian markets have been merely “empty promises.”

“At the same time, last year the three countries of the Customs Union, their trade with the European Union grew by 2.5 percent,” notes ISS analyst Popescu. “So in many ways the Russian or Kazakh trade relationship with the European Union is healthier than between themselves.”

Popescu notes that numerous studies have found the economic development of all the post-Soviet countries would be helped more by stronger trade relations with outside countries than by deeper integration among themselves.

Furthermore, Russia increased protective tariffs in response to the global financial crisis and forced the other Customs Union members to do so as well. Kazakhstan, in particular, has complained of “trade diversion” — which occurs when higher duties for goods from non-Customs Union members cause them to be forced out of the market by cheaper, but lower-quality goods from member states.

If the Russian economy is targeted by blanket sanctions from the West over the Ukraine situation, the other members of the Customs Union could suffer indirectly as well.

The Prospective Members

Despite such unconvincing economic figures, both Armenia and Kyrgyzstan are moving ahead with road maps to join the bloc.

Armenia stunned many observers in the fall of 2013 when President Serzh Sarkisian announced Yerevan would suspend a long-negotiated Association Agreement with the European Union and seek membership in the EES instead.

Armenia, long politically and economically isolated because of its dispute with neighboring Azerbaijan over the Azerbaijani region of Nagorno-Karabakh, is heavily dependent on Russia for political, economic, and security support. Sarkisian said that because Armenia is a member of the Russia-led Collective Security Treaty Organization (CSTO) security arrangement, it made sense to also join the EES — although formally there is no connection between the two.

Analysts have also speculated that Russia agreed to reduce its support for political competitors within Armenia, which may have increased the EES’s attractiveness for Sarkisian.

Dragneva-Lewers notes that the EES does not “purport to change the nature of domestic institutions in the manner that the EU does.” Joining a union of three post-Soviet authoritarian regimes has appeal for certain post-Soviet countries, while countries such as Moldova, Ukraine, and Georgia with more open political systems have been the most skeptical.

Kyrgyzstan fits into the former category, says Bishkek-based political analyst Elmira Nogoibaeva.

“It seems like Kyrgyzstan is a country that is only copying the models around it,” she says. “Kyrgyzstan isn’t even trying to work out its own foreign policy. It is purely inertial reaction to the surrounding environment.”

Businesspeople in Kyrgyzstan also have voiced concerns about joining the Customs Union. Farkhad Tologonov, president of the Light Industry Association in Bishkek, says that 60 percent of Kyrgyzstan’s imports come from non-Customs Union members, particularly from China and Turkey.

Duties on those goods will more than double if Kyrgyzstan enters the Customs Union.

Chinara Kasymbekova sells coats and other clothing at the Dordoi market in Bishkek — the largest market in Central Asia.

“There won’t be any business,” she told RFE/RL. “You see how everything is getting more expensive. The prices are already high and if we enter the Customs Union then there will be nothing at all. People don’t want the Customs Union and they won’t work. I don’t know what will happen. Maybe people will sit at home. Maybe they will move abroad. I don’t know.”

Nonetheless, Kyrgyzstan keenly feels its international isolation and its lack of opportunities. At a press conference following a Customs Union summit in Moscow last December, Kyrgyz President Almazbek Atambaev sounded more resigned than enthusiastic.

“You also must understand that, unfortunately, we don’t have many alternatives,” he said. “Ukraine can choose between association with the European Union or the Customs Union. Our selection is small.”

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