Russia and the Eurasian Economic Union

12.07.2020 | Case Studies | Vladislav Inozemtsev

This blog is part of the series, “Joining the Eurasian Economic Union: Perspectives from the Eurasian Business Community.” It features analysis from renowned economists in EAEU member states and Uzbekistan. This series follows the CIPE-supported virtual roundtable held on October 13, 2020 in partnership with the American Chamber of Commerce in Uzbekistan. The event recording is available in both English and Russian

 

In this paper, I focused on assessing the links between Russia’s political agenda in the post-Soviet space and the progress of Eurasian economic integration, using as a major hypothesis the thesis that Russia’s aim is to transform its economic predominance in the region into different forms of political influence, and that the creation of EAEU was one of the levers promoting this goal. My methodology was based on analyzing economic data provided by the participating EAEU countries, as well as changes in Russia’s official attitude to different elements of Eurasian integration over time.

In general, my conclusion was that Eurasian economic integration has not been a significant factor influencing the Russian economy and that its direct impact has been almost imperceptible. The one and only positive outcome was that the creation of the EAEU provided a much more controlled legal framework for immigration from less developed post-Soviet countries to Russia, eliminating excessive bureaucratic regulations.

However, even this positive consequence was almost fully nullified by the coronavirus pandemic. A moderate increase in industrial exports from Russia to the other EAEU nations may be called another encouraging result even if it was quite limited in comparison to Russia’s overall exports. All the other results, I would say, may by and large be neglected. At the same time, Russia, as the major driving force behind the integration, exposed its own weaknesses when other participants attempted to implement common rules.

Eurasian economic integration has not been a significant factor influencing the Russian economy and that its direct impact has been almost imperceptible.

These efforts created noticeable difficulties for the Russian bureaucracy and provoked tensions with partner states. In addition, Russian imports from EAEU nations increased somewhat, but these developments might be called negative only with some degree of exaggeration.

My main conclusion is that Russia is trying to play ‘great power politics’ in Eurasia and the EAEU now resembles an instrument that enables the Kremlin to ‘exchange economic benefits for the illusion of geopolitical influence’. Considering that the most ambiguous attempts, such as the introduction of a single currency, were effectively blocked by Moscow’s partners, the EAEU now looks like a good opportunity for member states to enjoy more equal cooperation with Russia. The EAEU countries may press Russia further to create a common energy market, liberalize transit issues, further open its domestic market, etc. – with little fear that Russia will take over branches of their economies and/or conquer their markets.

I would argue that Russia these days is willing to provide even more economic benefits and concessions to its neighbors if they express some degree of political loyalty towards Moscow. I see no real possibility of Russia establishing control over its partners’ economies.

While my assessment of the short-term prospects of the EAEU is mostly a pessimistic one, I am mostly expecting stagnation of this economic bloc and not anything like a crash or dissolution. Little progress will be made in basic spheres, since Russia in not interested in either creating a real common market for basic products like energy or in establishing any truly independent supranational institutions. Therefore, Moscow will cope with the growing claims of criticism made by partners and offer partial concessions in many other spheres, in which EAEU members might be active.

The online event that took part on October 13 may be considered a very successful one as it reflected similarities in the positions of experts based in different EAEU nations and provided useful information and timely insights on the union’s development. I believe all the speakers involved proved their high qualifications and might constitute a nice group for conducting further research on this issue.

 

Vladislav Inozemtsev is a Russian economist and director and founder of the Center for Post-Industrial Studies in Moscow, a nonprofit institution that specializes in organizing conferences on global economic issues and publishing books. He was a professor and chair in the Department of World Economy, Faculty of Public Governance, Moscow State Lomonosov University until 2017 and previously resided in Vienna as a senior visiting fellow at the Institut für die Wissenschaften vom Menschen (IWM). He has also taught at various universities, including at the Moscow State Institute of International Relations (MGIMO) and Higher School of Economics in Moscow. From 2002 to 2009, he was head of the Scientific Advisory Board of the journal Russia in Global Affairs. In 2011, he was managing director of the Global Political Forum, organized in Yaroslavl under the authority of then-president Dmitry Medvedev. Dr. Inozemtsev is the author of over 600 printed works published in Russia, France, the United Kingdom, and the United States, including 15 monographs, 4 of which have been translated into English. He has never been affiliated with the Russian government or any other foreign government and has never served as an elected official at any level. Between December 2011 and March 2012, he was a senior adviser to Mikhail Prokhorov, at that time a Russian presidential candidate (who came third in the 2012 elections) and authored his presidential program. Since November 2012, he has been chairman of the High Council of the Civilian Force, a newly established Russian center-liberal, pro-European party. Dr. Inozemtsev has contributed to the CSIS Russia and Eurasia Program’s analytical work on Eurasian integration, the Eurasian Economic Union, and the economic development of the Russian Arctic.