World Economy
Special Operation in Ukraine: Consequences for the EAEU and Continental Integration

Russia launched its special operation in Ukraine after exhausting all diplomatic attempts to stop US/NATO military expansion. Putting aside anti-Russian propaganda, the success of Russia's special military operation is beyond a doubt, according to adequate experts. However, it must be stated that NATO assistance to Ukraine threatens the vital security interests of Russia, while those of the United States remain unaffected. The result will be a significant change in  Eurasian integration, both in terms of the EAEU and the Greater Eurasian Partnership.

The first move by the United States - an attempt to smash the Russian economy and provoke social protests - did not work. The exchange rate of the ruble has recovered, prices for Russian exports are breaking records, and the EU countries have begun to buy Russian gas for rubles. The Russian government expects a 9% decline in GDP by the end of 2022. The economy has already experienced and withstood such pressure: in the “pandemic” year 2020, the GDP decreased by 9%, and during the crisis of 2008-2009 the fall was even greater.

The second US/NATO move was to increase its pumping of Kyiv with heavy weapons, as well as arming them with intelligence data and money. The goal in the West is to weaken Russia and reach a military solution instead of endorsing the negotiations that Moscow continues with the Ukrainian regime. As Russian Foreign Minister Sergey Lavrov rightly noted, this essentially amounts to a NATO “proxy war” against Russia.
Washington's desire to weaken Russia through the war in Ukraine is dictated by its struggle to retain a disappearing unipolar world order.

Given the debt-damaged economic potential of the United States, its last recourse is to hold on to the expansion of the global military infrastructure. It is noteworthy that the share of Western countries that applied sanctions against Russia in the world GDP has decreased over 20 years by 20% and is now a little more than half (if you remove speculative financial markets from the calculations, it is less than half). At the same time, the countries that did not support sanctions account for 2/3 of the world population. The US and its NATO allies consume far too much of the world’s resources, given their role in the real world economy.

Consequences for the countries of the Eurasian Union

Solving the tasks of the special operation will qualitatively strengthen the geopolitical prestige of Russia. The international status of Russia will be reviewed and brought into line with the increased capabilities of the country instead of the "status of the RSFSR" in the early nineties. The quintessential nature of these capabilities will be confirmed - the ability to protect one's interests in a systemic struggle against a strong adversary, in this case, the United States. Russia's success will create a powerful trend around it to attract nearby countries. The increased prestige of the EAEU will lead to new countries requesting to join.
This does not mean denying the integration experience of the previous decade. The creation of a customs and then an economic union in a short period of time created a platform without which today's sanctions would have destroyed trade ties between Russia and the EAEU states. This would plunge the rest of the union into a severe crisis, given that Russia accounts for 80% of the EAEU's GDP.

Thanks to the infrastructure of the Eurasian Union, the member states have progressively reduced their dependence on the dollar in mutual trade; by 2020 the share of ruble in mutual settlements exceeded two thirds (70-75%).

The depth and speed of the development of the EAEU in the next 10-15 years will depend on two key points: 1) the development of relations between Russia and China; 2) the registration of new relations between Russia and Western Europe. These relations will be more equal and beneficial for Russia than during the post-Soviet period of geopolitical weakness. The development of Russia's relations with China will create favourable, predictable conditions for the rise of Central Asia.

The imperative for the coming years will be growth the no-dollar system of coordinates. We are talking about building a self-sufficient economic contour with an autonomous base of critical resources and components, as well as a secure financial infrastructure. Solving these problems will make it possible to prepare for the consequences of a bitter confrontation between the United States and China.

Naturally, it makes no sense to talk about economic security in isolation from social security. As the events in Belarus and Kazakhstan in 2020-2022 have shown, the key countries of the region need Russia to ensure internal peace and the stability of state institutions. If the governments of these countries attempt to distance them from Russia (not so much for economic as for political and ideological reasons), they risk losing power entirely. 

The stakes for Russia's partners in the EAEU and the CIS have risen sharply. In the early 2000s one could still hope for a soft “grinding” of the country through the purchase of elites by American multinationals and NGOs. Those times are over: the only option is a violent overthrow of the elites followed by a steep decline in HDI, as we witnessed following the coup in Ukraine and the abortive coup in Kazakhstan, which was prevented with the help of Russia.

Asia and Eurasia
CSTO as Peacemaker
Rashid Alimov
The CSTO-2022 is the result of colossal multi-year joint efforts made by the six member states of the organisation, writes Rashid Alimov, SCO Secretary General (2016-2018). The article was prepared for the Valdai Club Conference with the support of the Russian Foreign Ministry, titled "Collective Security in a New Era: Experience and Prospects of the CSTO".
Expert Opinions



Crisis and new opportunities

Western sanctions will exacerbate the global food and migration crises in the next 1-2 years. Russia provides for the essential needs of the world economy, having the largest reserves of energy and food, and providing about 20% of world wheat supply. The imposition of sanctions against Russia and Belarus, the world’s largest producers of inexpensive fertilizers, coupled with a jump in gas prices, will take a deadly toll on harvests in the coming years.

At the same time, at the beginning of 2022, there was already an unprecedented shortage of energy resources and metals in the world markets, and the United States is witnessing its highest level of inflation in 40 years. Rising prices for export goods will allow Kazakhstan, Belarus and other EAEU countries to increase export earnings, thereby recuperating amid global inflation.

The Russian economy’s accumulated potential, including its experience overcoming the 2014 sanctions, will allow the Russian economy to quickly adapt to the latest sanctions and the global crisis. In the coming years, Russia will go through a laborious period of completing the construction of a self-sufficient industrial core, including with respect to the defence industry, high-tech engineering, and the IT sector.

Russia will expand payments in Russian rubles on loans and energy supplies. The transition to payment in rubles for energy products reduces the price for importers from the EAEU countries. Thus, by maintaining a fixed gas payment at the rate of 75 rubles per dollar, Belarus will save $0.5 billion in 2022. In general, Minsk’s savings on low gas prices ($128.5 per thousand cubic meters) compared with prices in the EU in 2021, will be about $5 billion per year.

The further reformatting of the Russian economy and the departure of Western brands will open windows of opportunity for partner countries in the EAEU to increase the export of services, food, and engineering products. New niches will be vacated on the Russian market, and the EAEU countries will receive privileged access. At the same time, the reduction of socio-economic tension in neighbouring countries will also depend on the export of labour resources to Russia.

Russia will increase imports from neighbouring countries to replace supplies from unfriendly states. Resources aimed for Western markets will be redirected to Russia and neighbouring countries. An impetus will be given to the construction of West-East and North-South transport infrastructure corridors.

Dynamics in the World Grain Market
Wheat is the staple food for more than 35% of the world's population. Supply chain and logistics disruptions to grain and oilseeds production in Ukraine and Russia, as well as restrictions on exports from Russia, will have serious implications for the food security of at least fifty countries that depend on Russian and Ukrainian exports by 30% or more.
Infographics



Equal relationships instead of exceptional ones

By protecting its vital interests, Russia is contributing to the disappearance of a world order based exclusively on the West.

This exclusivity lies in the West's unfair control over most of the world's resources, which do not belong to it. The US is living beyond its means, "exporting" inflation to developing countries which rely on the dollar as the world's reserve currency. At the same time, over the past 20 years, the United States has become the largest debtor in the world; the cost of the dollar does not reflect its real value.

Instead of fair market conditions, this system of dominance is supported by the US/NATO global military infrastructure used to contain China, Russia, the EAEU and BRICS+ countries. Such an asymmetric, unjust model requires the moral self-justification of the West as exclusive and irreplaceable, but this is an illusion.

Asia's economic recovery is causing growing concern and opposition from Washington. The military power of Russia, the only country in the world capable of destroying the United States, de facto protects this rise, as does the sovereignty of the EAEU countries. As a result, there are opportunities to create a more balanced world, without distortions which unfairly benefit West, that since the 16th century has used force of arms and rent extraction.
The logic was visible in the very embryo of this system - the installation by the Portuguese naval expeditions at the beginning of the 16th century of "pay-to-pass" (a "marine racket") for Indian and Arab ships in the Indian Ocean and subsequent European colonialism.

It's time to think about alternatives, for example, Eurasian ideas about complementary economic spaces ("continental neighborhoods" ). Or Adam Smith's idea of ​​"natural growth", the benefits of which are more widely distributed among the population, avoiding the hyper-concentration of wealth and power. Russia is promoting this philosophy at the international level - in the format of a multipolar world, in other words, a world of equal cultures and civilisations.

The sprouts of a new world order are already visible. As US debt has risen over the past 20 years, other countries have gradually reduced the dollar's share of global reserves. According to a  March 2022 IMF report, over 20 years the share of the dollar has decreased from 71% to 59% due to its replacement with national currencies. The process will accelerate after the erosion of confidence in the dollar due to the theft of Russia's dollar reserves, which has obviated huge risks for China and India.

As Yaroslav Lissovolik rightly notes, the scope for de-dollarisation in the global economy remains significant, given decades of inflated dollarisation and the growing role of developing countries in the global economy. This will also be facilitated by the formation of a settlement architecture parallel to the dollar, including new units of accounting (probably tied to real values ​​and resources), as is currently being discussed between the EAEU and China.

In such a scenario, there are all the prerequisites for the establishment of a long-term peace and co-development regime in Eurasia, based on the principles of equivalence. Equivalence does not mean the absence of hierarchy and organisation in integration structures - countries and their capabilities naturally differ. But this precludes external players from charging unfair rents through military superiority, monetary and, more importantly, cultural capture, which ruin the societies.

De-Dollarization of the Economy as a Way to a New Economic Order
The change in monetary policy of China and Russia is the most dramatic turn since the Bretton Woods Conference in 1944.
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Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.