Eurasian Economic Union: Recent Trends and Prospects

27.06.2017

On June 26, the Valdai Discussion Club hosted an economic seminar, titled “Eurasian Economic Union: Recent Trends and Prospects”. Seminar participants discussed successes of, and obstacles to Eurasian economic integration, involving five post-Soviet states –Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia – along with ways to harmonize it with the Chinese-led Belt and Road Initiative.

Dmitry Korshunov, head of projects at the Eurasian Development Bank, presented a report on the Eurasian Economic Union (EAEU) member-states convergence. According to him, three out of the four countries exhibit a steady convergence to Russia, closing the development gap annually by around 0.7‒1.4 pp. The only country that shows a lack of convergence, is surprisingly the poorest of all: Kyrgyzstan.

At the same time, compliance with sustainability criteria, including inflation, central government consolidated budget deficit and central government debt, has been unsatisfactory over the past three years and in 2016, all EAEU member states were in breach of one or more criteria. Unsatisfactory compliance with the EAEU criteria points to the need of a clearly defined implementation mechanism or it may even be necessary to review the criteria themselves, Korshunov said.

Vyacheslav Sutyrin, editor-in-chief of Eurasia.expert online edition, focused on the institutional aspects of Eurasian integration. According to him, its current nature reflects the global trend of moving from stiff unions to deal-based environment. This flexibility can be both advantage or disadvantage for the EAEU, he said, and a deeper discussion of common interests is needed.

Sutyrin described the common labour market as one tangible success of the EAEU. Following up on this, Yaroslav Lissovolik, the moderator event, pointed to the importance of remittances for some members of the economic bloc. Until recently, remittances from Russia made up 30% of GDP of such states as Kyrgyzstan. The volume of remittances began to decline in the recent years, to which EAEU states responded by boosting exports, including to Russia, in what Lissovolik called “second-order import substitution”. Interestingly, the countries, which became part of EAEU, were first to experience recovery of remittances recently, which is an important incentive for other countries considering accession.

Another important aspect of Eurasian integration are free trade agreements. As of today, EAEU has an FTA with Vietnam and thirty to forty countries have declared their interest in following suit.

But an overarching goal for the EAEU is harmonization of its efforts with the Chinese-led Belt and Road Initiative to promote connectivity and cooperation between Eurasian states. There are about forty projects discussed at the government level, chiefly in the transportation sphere. As Lissovolik noted, many EAEU countries are landlocked and Belt and Road can link them to global markets. At the same time, with the EAEU, Belt and Road becomes more effective, intermediating flows of goods across Eurasia.

With Greater Eurasia being a distant goal, EAEU member-states should concentrate on more doable tasks, the seminar participants agreed. One of such tasks could be complementing the Eurasian Economic Commission, the bloc’s vertical structures, with horizontal ones, involving businesses and civil society. As Lissovolik pointed out, integration within the Eurasian Economic Union (EAEU) was largely inspired by the European Union’s success story and one of the reasons for that success was that it was an effort coming both top-down and bottom-up. Working more closely with business circles, making them the main vehicle of integration processes would be a way to take Eurasian integration to a new level, he said.


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