Future of Eurasian Economic Union depends on Russia's economic situation

Baku, Azerbaijan, Jan. 7

By Aygun Badalova - Trend:

The future of of Eurasian Economic Union (EEU), which went into effect on on January 1, 2015, depends on Russia's economic situation, an expert on Central Asia and Senior Correspondent at Radio Free Europe/Radio Liberty Bruce Pannier believes.

"If Russia's economic situation was better at the moment the EEU might have a better chance. The EEU could still have a future if/when Russia's economic situation improves but there is already an impression among some in Belarus, Kazakhstan and Kyrgyzstan and Armenia that they are being forced into an organization led by big brother Russia," Pannier told Trend.

Regarding the prospects of the Union, Pannier believes that the main challenge for the EEU firstly would be to truly integrate in terms of trade between member states, and that will be difficult at present.

"Even before the problems in Ukraine there were rumblings from Belarus and Kazakhstan, which along with Russia made up the Customs Union that preceded the EEU, about Russian restrictions on transit of goods, tariffs, and perception Moscow was implementing regulations without consulting with Minsk and Astana beforehand," Pannier said.

On January 1, 2015 the treaty between the presidents of Russia, Kazakhstan and Belarus authorizing the EEU went into effect. Armenia joined a day later, while Kyrgyzstan is set to join in May. Membership talks with Tajikistan are ongoing.

Pannier believes, that in theory the Union should help provide reliable markets for member countries' goods, and for those who need oil or natural gas (Belarus, Kyrgyzstan and Armenia) it should help to procure needed energy resources (from Russia and Kazakhstan) at reasonable rates.

However, EEU membership, according to Pannier, also carries restrictions on trade outside the Union, and it remains to be seen how closely member states will want to follow these regulations.

"This is particularly the case with Kazakhstan and Kyrgyzstan, both of which border China. Both those Central Asian countries are becoming increasingly dependent on China as a customer and investor, and one day they could be faced with a choice of obeying trade rules set by Moscow or continuing to court better ties with rich neighbor China," the expert said.

The matter of currencies should not be overlooked either, according to Pannier.

"The decline in the value of the ruble has already caused problems throughout the CIS since all those countries, with the exception of Ukraine now, have always had strong trade ties with Moscow. Would the EEU countries be willing to trade amongst one another using the ruble? What about, for example, the fact that the Kyrgyz som is now at a similar rate to the Russian ruble?", Pannier said.

"EEU members already feeling the pain of the drop in value of the Russian ruble," Pannier said wondering how close would they want to be to Russia if the ruble continues to drop in value, or simply is very slow in recovering.

Talking about the prospects for Eurasian Union to compete with the EU, Pannier said that given Russia's current economic situation and the perception EEU rules are actually Russian rules, he cannot see the EEU competing with the EU anytime soon.

"Beyond that, the EU is a bigger, more diversified market, and that it is much more closely bound together by communications links - roads and railways. There are vast distances in the EEU that run through sparsely inhabited areas and only a few roads and railway links to connect them," Pannier said.

---

Aygun Badalova is Trend Agency's staff journalist, follow her on Twitter: @AygunBadalova

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