Russia Facing the Challenges of Eurasian Regionalization

The geo-strategic and geo-economic gamble for Russia, as it undertakes its “turn to the East” is that economic and diplomatic gains from this shift will enable it to return in its new incarnation as a “Eurasian powerhouse” to new bargaining processes with the EU as an indispensable partner in the even Greater, writes Valdai Club expert Piotr Dutkiewicz.

In 2019 WTO has listed 472 active Regional Trade Agreements (RTAs). More than half of them are multilateral agreements. That impressive web of trade connectivity strongly suggests that new area of regionalism is on the way.

The so called “new regionalism” is often presented within four distinctive frameworks within the transformation of the global system. First is the end of the Cold War and its global/regional economic consequences. Second is the relative decline of US global hegemony (accompanied by US regional policy – i.e. NAFTA/CUSMA). Thirdly, steady erosion of the Westphalian nation-based sovereignty petrified by institutionalization of at least three major economic blocs (EU, North American CUSMA and BRI/EEU/APEC/IRF/IOR). However, the note of caution is necessary as all major blocks are simultaneously regional and global either in their statutory foundations or by scale and economic vibrations of their activities. Also, all “regional blocks” are based on the globalist’s functional assumptions (such as – for instance – liberalization of trade barriers and absolute and comparative advantages of such arrangements). It is – thus – important to note that New Regionalism is embracing simultaneously different levels: the changing global system level, the inter-regional level and sensu stricto regional level and usually involve as much state as non-state actors in enlarging/deepening integrational processes. The shift towards new regionalism is not surprising, but key issues remains under-researched that might help us better understand the directions, depth, consistency, long-term consequences and durability of this shift.

Both major regional projects in Eurasia – BRI and EAEU – are showing more functional and structural differences than similarities. Just for start – EEU is a regional organization while BRI is based (mostly) on bilateral basis. EEU is an institutionally structured organization while BRI has no such institutional/legal infrastructure. There is a large-scale economic asymmetry between them. There is a different process of dispute settlement, different project financing mechanism, different project-based management system, to list just a few. At the same time – so far – there is no evidence that these two processes of regional Eurasian integration are visibly competitive, which may suggest that the new regionalism may to an extent bolster rather than impede (global and regional) multilateralism. On the other hand, both projects are so differently structured that some tensions (based on different procedures, business culture and absence of clear dispute settlement mechanism) are inevitable in short and medium time spam.

The simple answer to the question what is common in those two so different projects is: common goals and common threats. In this sense, the crucial aspect is the success or failure of the Eurasian Economic Union and the various BRI projects. The best model would be New Eurasian Pragmatism based on WTO rules but with a stronger civilizational and security component included into those projects.

Since the early 1990s Russian foreign policy was constructed on two premises: a strategic necessity to integrate with the broadly defined “West” (on the basis of a respectful partnership as an equal player) and, equally important, Russia’s reintegration with the former republics. Both goals had failed by 2014 for different reasons. On the one hand, Russia was not accepted as an equal Western partner; on the other hand, as Dmitry Trenin remarked, “The Ukraine crisis in 2014 […] put an end to Russia’s alternative strategy to reintegrate former Soviet republics and restore a Moscow-led power center in the former USSR. This left Russia with a third option: moving east. Obviously Russia is not a newcomer to this region as it was part of the Russian imperial area of activity for the last three centuries, but this time Russia had to leave the comfort zone of having – usually – an upper hand as a dominant partner and face a new configuration of sovereign states or economic giants like China.

If it is true that necessity is mother of invention, then Russia is – roughly since mid-2010s – in the complex process of reinventing herself in the new strategic framework now being called Greater Eurasia. The stakes are high for Russia. Without influence on Ukraine’s France-sized territory, rather weak Russian economic presence (9% of Russia foreign trade) within her “own” Eurasian Economic Union (EAEU) and its members calculating their gains not only in economic terms but also in their “sovereignty scale of independence” from Russia’s influence, Russia’s move towards closer partnership with China and expanding regional institutions (SCO and SCTO) is the most pragmatic and most possibly beneficial – albeit not without risks – strategic “third” choice.

The geo-strategic and geo-economic gamble is that economic and diplomatic gains from this shift will enable – in time – a strengthened Russia to return in its new incarnation as a “Eurasian power house” to new bargaining processes with the EU as an indispensable partner in the even Greater Eurasia (including EU). The risks for Russia are already quite visible. Starting from a China that sees “Greater Eurasia” mainly from her BRI opportunities and, as Zhao Huasheng points out “The significance of Eurasia to China concerning strategic national security is due to its status as China’s strategic rear, not as the source of strategic pressure”. Also China, contrary to the worries of some Russian experts, does not intend to dominate her economically. But, contrary to some optimists, neither is it not going to revitalize the Russian economy through large investments and technology transfers, as it has already has what it wants from Russia (i.e. energy supplies, military technology, and stable cooperation in the north). This position can be disputed by some experts who see Chinese investments in Russia on the rise; see T. Bordachev in this volume: “By 2016, gross Chinese investment in Russia reached $32 to $33 billion. If the Chinese experts calculated correctly, this means that China is already one of the world’s largest foreign investors in Russia, and the issue is about increasing Chinese investments […] China is the second largest trading partner of Russia, after the EU, with $68 billion in bilateral trade in 2015. The EU's share in Russian trade is falling, while China’s share is rising.[/i] China aims at stable, multidimensional partnership but not an alliance with Russia.

Secondly, EEU’s five partners not only worry about their asymmetric relations with Moscow as a potential source of domination, but also have in the recent two years observed that “There are a lot of different problems in Central Asia on the level of separate states as well as on the level of the region as a whole. These interacting problems create very unfavorable environment for interstate cooperation in the region.”

But the principal challenge seems to be Russia’s domestic economic development. Without improvement in that area, Russia’s grand vision and grand Eurasian development schemes may be stopped at the current – what we can call as – “enhanced networking cum free economic space” level. The stakes are high as either Eurasian projects will reinvent Russia’s regional and global position as a moderator and stabilizer in the emerging continental system, or signify her status as an important but lonely power.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.