A year under a shock: Eurasian Economic Union is moving ahead

The Eurasian Economic Union (the Union) will soon mark its first birthday. The past year was not easy: falling oil prices crippled the Russian and Kazakh economies, thus affecting Armenia, Belarus and Kyrgyzstan as well.

Objective problems relevant to low oil prices and Western sanctions against Russia were accompanied by subjective ones, including attempts to re-export Western goods banned in Russia via territories of Belarus and Kazakhstan.

The problems and prospects of Eurasian integration were the key topic of the Dialogue in the Name of the Future-2015, organized by the Alexander Gorchakov Public Diplomacy Fund in Dec 2015. During the forum Russian experts and government officials answered questions by representatives from 20 countries.

One of the questions was about the future of the CIS free trade zone agreement – especially now that Russia is going to ban Ukrainian products and cancel zero customs tariff for Ukraine. In fact, the pro-European orientation of Ukraine and Moldova calls in question the future of the agreement.

According to expert of the Russian Foreign Affairs Council Nikita Mendkovich, even though, politically, the idea of a CIS free trade zone is no longer practicable, the agreement will not be revoked right now. Most probably, it will be gradually replaced with bilateral accords so that the member states have time for adjusting themselves to a new reality, he told an EADaily correspondent.

Much attention was paid to economic problems in the EEU countries and drastic reduction of the mutual trade. Member of the Board (Minister) for Development and Integration of Macroeconomics of the Eurasian Economic Commission Tatyana Valovaya said that most of the members of the Eurasian Economic Union are bound up with the Russian economy. “So, if we had no union, we would have the same but much worse - for in the framework of the union we can at least coordinate measures and get some results,” she said.

According to Valovaya, this year trade among the Union members is expected to drop by 24% but this is due mostly to falling oil, gas and metal prices. In terms of quantity, the index dropped by just 10%. “The problem here is that we calculate our trade in US dollars, while with Belarus, Armenia and Kazakhstan we first calculate in rubles and then convert to US dollar. As a result, we get much lower indices,” Valovaya said.

According to her, mineral resources account for as much as 72% of the Union’s exports. “This is why we are so vulnerable to changes in oil, gas and other energy prices,” Valovaya said.

When asked about the problems caused by Kazakhstan and its decision to join WTO, the expert said that she understood the emotions of some Union leaders (particularly Belorussian President Alexander Lukashenko said that Kazakhstan’s decision would create lots of problems for the Union and for Belarus, in particular).

“Mr. Lukashenko is concerned for his country, which is the only Union member outside WTO. He is afraid that WTO will impose its terms. Russia joined that organization on its own terms. For Kazakhstan they offered different - more liberal - terms. But this does not mean that Kazakhstan does not care for the other Union members. It was trying to get the same terms Russia got but was offered different terms. The choice was as follows: either Kazakhstan would not join WTO or it would join WTO and we would have to live under new terms for three-four years. We chose the latter scenario. But we are also going to create all conditions for not letting Kazakh goods to flow to other states. The Kazakhs promised us to control their flow,” Valovaya said.

She said that Armenia and Kyrgyzstan had no such problems as they joined the Union as WTO members, so, they can revise their obligations. “They have already done this, while Kazakhstan will be able to do this in no earlier than three years,” Valovaya said.

She is sure that Belarus will also face problems once it joins WTO. “But we want all of our members to join WTO so we can join it later as a union – just like the EU did. This will give us more authorities and opportunities,” Valovaya said.

The best thing about Valovaya’s speech is that despite Russia’s political confrontation with the West, the Union members are still committed to actively cooperate with Europe. “Our Union is not a fortress, we are not going to fence ourselves out from the world but are committed to use the Union as a basis for a system of equal partner relations with the European Union, the United States, China,” Valovaya said.

Concerning the Union’s enlargement prospects, she said that judging from the EU’s experience, quick enlargement is not always very effective. “Any union needs a basis for enlargement,” she said.

Valovaya was very optimistic about the future of the Union. She said that the union would have long collapsed were it not for its leaders’ belief in its future. “It has been a hard year and our union has proved its viability and efficiency. Every time we face some new challenge, be it sanctions or anti-sanctions, we are trying to move ahead,” Valovaya said.

Hayk Khalatyan, specially for EADaily