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  • 24 Nov 2022, 10:27

The EAEU comprises Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan and has Free Trade Partners with Iran, Serbia, Vietnam and China and more countries poised to join. We examine the current status of EAEU trade and investment.      

2022-23 Eurasian Economic Union Trade & Investment Profile 

What Is The Eurasian Economic Union (EAEU)?

Initially a Customs Union, the EAEU announced it would take the form of a common market in 2011. Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia currently make up EAEU member states. Tajikistan is a candidate member, while Uzbekistan (a member up until 2011, and considering rejoining) and Moldova (an observer) have a formal relationship with the EAEU. It has a combined population of 167 million and a GDP of about USD5 trillion.

The EAEU differs from the other ex-Soviet trade bloc, the Commonwealth of Independent States (CIS) in that while all EAEU members are also CIS nations, the EAEU has a formal, multilateral free trade agreement status between them, and as an institutionalized body can enter into free trade agreements with other countries or trade blocs. The CIS nations are a looser arrangement where members have negotiated bilateral trade agreements among themselves. This ability of the EAEU to enter into FTA with other countries is starting to make headway; an initial FTA with Vietnam has proven a success, while both Iran and Serbia also have FTA with the EAEU. Interest in the bloc is growing and future expansion is likely.

The Eurasian Economic Union

Not Just Another Russian Project

Often referred to as another form of Russia’s control of its former Socialist satellite states, the EAEU is an economic project that was first formulated by Kazakh president Nursultan Nazarbayev in 1994 based on the Eurasian theories of Lev Gumilev. These theories sought to unite the peoples of the great Eurasian steppe inside a single, if heterogenous, economic bloc. Common geography – rather than common ethnicity – meant common fate and struggle, a principle rejected by Western-leaning Ukraine and Azerbaijan as well as neutral Turkmenistan. Geographically its true importance lies in the geographical space it fills between Western China and Eastern Europe, and it poised to develop, in part as a significant overland route between China, Central Asia, the Middle East (via the INSTC) and European Union.

Inspired by the European Union
The EAEU’s fundamental principles are the same as those championed in Brussels: the four freedoms of goods, services, capital and labour. The institutions are also a calque on those of Brussels: an EAEU Commission (HQ: Moscow) and a Counsel (HQ: Minsk). That said, the structure of the group is more pyramidal and heads of member states have more weight than in the EU.

(But Not as Successful)
Often criticised – especially by the West – for a myriad of inconsistent regulatory issues, the EAEU should be congratulated for the fact it is still standing despite containing economies vastly different in quality and with different foreign policy objectives – even going as far as armed conflict (skirmishes) between member state Kyrgyzstan and candidate Tajikistan earlier this year. Today, the EAEU remains a Customs Union with simplified migration rather than a fully-fledged Common Market. Another fundamental factor, or flaw, is that 80% of its economic weight is furnished by Russia – meaning any developments are likely to appear as Russian diktat rather than parties’ compromise. However, the Ukraine conflict, pressure from China and an increasing need for Russia to develop alternative trade sources have however seen Moscow start to take a more liberal view of EAEU trade and this may help in its future development.

Ukraine: A Crucial Moment for The Union
The interdependence of EAEU economies has meant that none have chosen to turn away from the project at a time of Western isolation for Russia. Indeed, the EAEU is a key vector for overcoming economic sanctions that Russia can and needs to leverage. Conversely, and due to sanctions pressure, Russia unilaterally suspended upholding the EAEU standards it had agreed to on imports in order to avoid more supply shocks, inflation and maintain demand until 01 March 2023. The bar has seemingly been set for the EAEU.