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The “new look” of the Eurasian Economic Union

  It has been seven years since the establishment of the Eurasian Economic Union. Its predecessor was the Customs Union established by Russia, Belarus and Kazakhstan in 2010. It currently has five member states: Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan. The organization has a market covering 180 million people, as well as natural gas reserves equivalent to one-fifth of the world’s total and nearly 15% of oil reserves. It is also an important source of raw materials such as food, minerals, and wood in the world.
  In terms of operation mechanism and efficiency, integration level, and vitality, the Eurasian Economic Union is the most successful regional economic integration organization in the “post-Soviet space” so far. However, the Russian-Ukrainian conflict has brought uncertainty to the development prospects of the Eurasian Economic Union, and adjustments are being made within the alliance in response to the deteriorating economic situation and external sanctions.
Uneven road to integration

  At the end of 1991, the Soviet Union declared its disintegration. Based on economic development, political stability and other considerations, the newly independent countries in the “post-Soviet space” have made many attempts at regional integration, but most of them have been reduced to “only on paper”. The Commonwealth of Independent States (CIS), established in December 1991, has played an active role in preserving existing infrastructure such as a unified electricity network and railway transportation, as well as in functional areas such as mutual visa exemption and labor mobility. More achievements. In 1994, the then President of Kazakhstan Nursultan Nazarbayev proposed the establishment of the “Eurasian Union” initiative in his speech at Moscow University, which was regarded as the source of “Eurasian integration”, but at that time it was not among the newly independent countries. It formed a resonance, and Russia, Ukraine and other countries questioned it, and it has not been implemented since then. In 2003, Russia, Belarus, Kazakhstan and Ukraine signed an agreement on the establishment of a unified economic space, but it was eventually abandoned due to the outbreak of the “Orange Revolution” in Ukraine in 2004.
  Since then, Russia, Belarus and Kazakhstan have not given up promoting the process of regional integration. In July 2010, the customs union of Russia, Belarus and Kazakhstan was officially launched. On October 3, 2011, Putin, as a presidential candidate, published a signed article in the Russian newspaper Izvestia, proposing the regional integration concept of establishing the Eurasian Economic Union in the CIS region and eventually developing into the Eurasian Union. At the beginning of 2012, the “unified economic space” of Russia, Belarus and Kazakhstan was officially launched, which means that the economic integration process of the three countries has transitioned from a customs union to a higher stage. On May 29, 2014, the heads of the three countries signed the Treaty on the Eurasian Economic Union, and the union was officially launched on January 1, 2015, with Armenia and Kyrgyzstan joining in that year.
  The reason why the Customs Union can and smoothly transition to the Eurasian Economic Union is that economic integration partially solves the practical problems in the economic development of various countries, and provides element support for economic stability and growth. The international financial crisis that broke out in 2008 objectively stimulated the economic integration process in this region. On the one hand, the financial crisis caused a large outflow of capital from outside the region, and foreign investors sold their assets to enterprises in the region, which objectively increased the asset share of countries in the region. On the other hand, the Customs Union of Russia, Belarus and Kazakhstan has reached nine trade agreements including common external tariffs and the elimination of most trade barriers. The scope is further expanded to 17 fields including macroeconomic policy, capital flow, energy, and transportation. At the same time, a crisis response fund was established under the framework of the “Eurasian Economic Community” (created in 2000, but withdrawn in 2014) to provide sovereign loans to relevant countries to tide over the crisis, thus increasing the need for economic integration by policymakers of various countries. awareness.
  The tortuous development of the “post-Soviet space” integration process shows that the countries in this region have real integration needs, and this integration is logically self-consistent rooted in their common historical heritage and their respective real political and economic needs. Polls conducted by the Eurasian Development Bank for many years show that the vast majority of people in various countries hold a positive attitude towards regional integration. More importantly, the bottom-up integration of the “post-Soviet space” has been developing continuously, especially the multinational companies of Russia and Kazakhstan continue to expand their business and investment in the region, these two countries are also other countries in the region. The main destination of the country’s labor outflow. In addition, the formation and operation of the integration mechanism must follow certain principles. Judging from the practice in recent years, the Eurasian Economic Union is based on the principles of economic pragmatism, respect for the sovereignty of member states, voluntary participation in integration and equality in the decision-making process, and respect for the political sovereignty of member states is the fundamental principle.

On August 20, 2021, a large-scale meeting of the Intergovernmental Committee of the Eurasian Economic Union was held in Cholpon-Ata, Kyrgyzstan.

  The biggest obstacle to national integration in building a “post-Soviet space” has long been the asymmetry of the political economy between Russia and other countries. Compared with other countries, Russia has advantages in terms of population and economic scale, resources and military. Critics have often accused the Eurasian Economic Union on this basis as “a vehicle for the Kremlin to restore regional hegemony”. In fact, not so. The Eurasian Economic Council, the permanent executive body of the Eurasian Economic Union, is made up of two ministers from each member state, an arrangement designed to undermine Russia’s leadership. In the process of integration, the leaders of Kazakhstan and Bai have repeatedly stated that they are pursuing economic integration, not political integration, and will not accept any supranational mechanism that threatens their sovereignty and independence. Although Russia often mentions and emphasizes the importance and priority of the alliance, it does not have absolute leadership in the actual operation of the alliance. In other words, the most important reason for the success of the Eurasian Economic Union is that Russia is mainly concerned with geo-economic realities, and other countries are only economically dependent on Russia.
Real results in the labor market

  Economic interdependence is the motivation for some countries to join the Eurasian Economic Union. The non-energy products that are uncompetitive in the world market by the three countries of Russia and Belarus will gain a larger consumer market, while the three countries of Belarus and Asia can enjoy cheap energy and related investment from Russia when they join the alliance. Supply chains for commodities across countries are more vertical and stable, and production and transaction costs are reduced. The employment situation of the two countries can be improved to a certain extent, the remittance income will also increase, and the labor demand of Russia and Kazakhstan has been supplemented. In addition, the Eurasian Economic Union, as a regional organization that cannot be ignored in the Eurasian continent, also provides member states with an external environment and “chips” to enhance their global political and economic competitiveness.
  The Eurasian Economic Union promotes coordination and cooperation among countries in the fields of trade, investment and labor mobility. The Union has always been committed to expanding the development of internal trade through measures such as reducing tariffs and implementing uniform customs laws. On January 1, 2018, the “Eurasian Economic Union Customs Code” came into effect; from 2016 to 2020, on the basis of eliminating 83% of the flow barriers, the Eurasian Economic Commission approved the “Barrier Classification Method” in February 2021, giving enterprises Power to participate in barrier review and oversight of the classification process.
  However, due to the strong similarity and weak complementarity of member countries’ economic endowments, as well as more non-tariff barriers, the growth space of intra-union trade volume is relatively limited. Since 2015, the trade volume within the Eurasian Economic Union has been fluctuating between US$50 billion and US$60 billion, and the trade volume is greatly affected by the foreign exchange market. In terms of foreign trade, the scale of foreign trade of the Eurasian Economic Union has not increased significantly, but the foreign trade pattern has changed. The proportion of trade with the EU has dropped from 42.1% in 2015 to 37.5% in 2019, while the share of trade with China has decreased. From 11.7% in 2015 to 15.4% in 2019.

  The member states of the Eurasian Economic Union have maintained a relatively stable level of mutual investment. Russia is the largest capital exporter in the Eurasian Economic Union. The stock of international direct investment (FDI) of Russian companies in the union accounts for more than 80%, mainly in fuel, non-ferrous metals, telecommunications, finance and transportation. In the industrial sector, the investment destination countries are mainly Kazakhstan and Belarus. Kazakh and Belarusian companies also mainly invest in Russia. In 2021, the Eurasian Economic Union intends to establish a supranational agency “Eurasian Corporation” to further enhance cooperation in the fields of industry and investment. The labor market is an area where the Eurasian Economic Union has achieved tangible results, with almost all barriers affecting labor mobility in each member state. As long as labor migrants from member states are “officially” employed by enterprises or institutions in other member states, their individuals and family members can enjoy the social security of the host country. In July 2021, the “Job Without Borders” job search system common to all member states of the Eurasian Economic Union will be launched to create more convenient conditions for labor mobility across countries.
The level of economic integration will not fall but rise

  The Russian-Ukrainian conflict has led to crisis and uncertainty in the development of the Eurasian Economic Union. Politically, Russia’s position and image in the region and in the Eurasian Economic Union have become increasingly complex. Economically, Western countries have imposed unprecedented sanctions on Russia and Belarus, impacting all member states of the alliance as well as internal and external trade of the alliance.
  On the economic front, the Russian-Ukrainian conflict has worsened the economic situation in the countries of the Eurasian Economic Union, which are slowly recovering from the impact of the new crown epidemic. According to the forecast of the Eurasian Development Bank, the economies of Russia and Belarus will fall into recession, and the economic growth of other member states will slow down again. In 2022 and 2023, Russia’s gross domestic product (GDP) is expected to decline by 7% and 3%, white GDP is expected to decline by 6.5% and 3%, Asia is expected to increase by 1.0% and 3.5%, Kazakhstan is expected to increase by 2.5% and 4.8%, Kyrgyzstan is expected to grow 1.1% and 1.6%. Since Russia is the largest trade and investment partner of other member states of the Eurasian Economic Union, the future economic situation of other member states will largely depend on the effectiveness of Russia’s economic recovery.
  The Russian-Ukrainian conflict will once again raise the level of economic integration in the “post-Soviet space” driven by the crisis. There is a view that because Western sanctions have seriously affected the economic and political stability of the Eurasian Economic Union member states, the alliance faces the risk of disintegration. Such voices have already emerged in Haji and Haji. However, Yelena Kuzmina, a scholar at the Primakov Institute of World Economy and International Relations of the Russian Academy of Sciences, pointed out that Western countries aim to force the member states of the alliance to refuse or reduce economic cooperation with Russia, but this is economically unrealistic. It is not difficult to see from some data that member states still rely on Russia to varying degrees in terms of economy and energy. A large number of labor migrants from various countries work in Russia. According to data from the Russian Ministry of Internal Affairs, in 2021, 34,000 Belarusians, 59,000 Kazakhs, 139,000 Armenians and 628,000 Kyrgyzians will sign formal labor contracts with Russian companies in Russia.
  For the member states of the alliance, the possibility of withdrawing from the alliance also does not exist, because the gains outweigh the losses. The sunk costs of building integration over the past ten years, as well as the high opportunity costs of domestic and foreign economic and trade policy adjustments, supply chain restructuring, immigration and unemployment, and anti-epidemic materials, will be in vain if we withdraw from the alliance. More importantly, the fundamental needs and conditions for economic integration still exist. Therefore, the policy logic of the member states of the Eurasian Economic Union is not to immediately cut ties with the Union when it is affected, but how to use the integration mechanism to hedge the destructive effects of economic sanctions. .
  After the outbreak of the Russian-Ukrainian conflict, the alliance actively took relevant measures to improve the level of internal trade. In March, the Eurasian Economic Commission imposed special tariffs on 450 commodities, including industrial goods, baby food and some agricultural and sideline products. Under the background that the member states of the alliance have successively issued grain export restrictions, thanks to Russia’s 150% wheat self-sufficiency rate and the complementarity of the food production of the member states, the overall grain self-sufficiency rate of the alliance has reached 93%, and the countries will further coordinate policies. , expand production, and promote the development of agriculture and food industries in various countries. The scale of local currency settlement of intra-union trade (currently 74%) is also expected to continue to expand, replacing the US dollar or euro settlement system. In addition, the Eurasian Economic Union aims to strengthen the integration and cooperation in the fields of investment, logistics, manufacturing, high-tech, and digital economy, so as to make the economic model of the Union transition from resource-oriented to resource-producing.
  From the perspective of the Eurasian Economic Union’s foreign relations, the share of Western countries in its foreign economic and trade structure may be further reduced, while the share of non-Western countries will continue to increase. The political and economic elites of the member states of the alliance have expressed many times that they will strengthen economic and trade ties with the BRICS, Shanghai Cooperation Organization, ASEAN, China, Iran, India, Mongolia, Indonesia, the United Arab Emirates and other countries. The “Asian Moment” of Eurasian economic integration is coming.