The Myths and Realities of Vladimir Putin’s Eurasian Economic Union

Published on EGF: 08.01.2013

by George Niculescu

By George Niculescu,
Head of Research, The European Geopolitical Forum

Why use the OSCE to take a “jibe” at you know who ?

When on 6 December 2012, in the margins of the OSCE ministerial meeting in Dublin, the US state secretary Ms. Hillary Clinton warned about "a new effort by oppressive governments to "re-Sovietize" much of Eastern Europe and Central Asia"[1], many observers of Eurasian affairs might have wondered why she lashed out at Russia just before meeting foreign minister Sergey Lavrov to discuss the Syrian crisis. To have her thoughts better understood she added: "It's not going to be called that. It's going to be called customs union, it will be called Eurasian Union. [...] But let's make no mistake about it. We know what the goal is and we are trying to figure out effective ways to slow down or prevent it."[2]
Such a statement by the head of US diplomacy might have sounded to some in Central and Eastern Europe like George Kennan's words in his report on "The Sources of Soviet Conduct" published in Foreign Affairs about 66 years ago: "In these circumstances it is clear that the main element of any United States policy toward the Soviet Union must be that of long-term, patient but firm and vigilant containment of Russian expansive tendencies."[3] In effect, Ms. Clinton voiced publicly the Western dominant perception of the Eurasian Customs Union, currently comprising Russia, Kazakhstan and Belarus, as a purely geopolitical project aiming to re-build the Soviet Union (or the Tsarist Empire) into a new institutional outfit. Is this perception a sort of emerging myth or is it grounded in reality? Are we about to face new geopolitical competition with ideological connotations opposing the former adversaries of the Cold War: the West and Russia?

Europe’s unsettled security lingers….
Looking at recent developments in the OSCE "baskets" one could hardly argue that we are heading towards a strengthening of the security environment in wider-Europe, including on the East-West axis. The protracted conflicts in Abkhazia, South Ossetia, Nagorno-Karabakh, and Transnistria are in a stage of risky limbo than being closer to peaceful resolution. Democracy and human rights have taken many steps back in former Soviet republics such as Belarus, Ukraine, Russia, Tajikistan, Turkmenistan, Kazakhstan, and even in Georgia, Armenia and Azerbaijan, admittedly to varying degrees and in various ways. The CFE treaties which used to promote military transparency and arms control cooperation among European states are now effectively anything but dead. Anti-Semitism, xenophobia, discrimination against immigrants, Roma, and other vulnerable minorities are on the rise throughout Europe.

……As Moscow strives to reassert itself
Against this backdrop, a Western myth of the Eurasian Economic Union as a means to "re-Sovietize" Eastern Europe and Central Asia has started to emerge as a defensive reaction against the constant efforts of Moscow to re-assert its regional power in its "near abroad" in what it imagines as a geopolitical competition with an US-led invasive West. Such efforts are reflected in various developments, among which we can list the following:

• Ruslan Pukhov, the director of the CAST (Center for Analysis of Strategies and Technologies) think tank, closely associated with the defense ministry, declared Russia a “revisionist power” that is outside the Western world, is opposed to the present world order and must destabilize it in order to achieve its national ambitions. According to him, the Russian military must prepare to fight and win low-intensity conflicts with separatists inside Russia and in neighboring states, like the war with Georgia in August 2008. At the same time, Russia should develop conventional military capabilities to successfully prevent the incursion of US forces into the post-Soviet space without the use (or with pinpoint tactical use) of nuclear weapons. At the same time, according to Mr. Pukhov, the strategic nuclear parity with the US must be maintained as a deterrence of last resort. Overall Russia must build armed forces that could give it a free hand in dealing with neighbors within its sphere of influence, while depriving the West of any hope to intervene.[4]
• At the political level, in an interview published on September 26 in the official government Rossiyskaya Gazeta, Deputy Prime Minister in charge of armaments, Dmitry Rogozin, highly praised President Vladimir Putin’s plans to “reindustrialize Russia” by spending hundreds of billions of dollars to rebuild its defense industry. Recalling his “ambassador at NATO experience”, Mr. Rogozin insisted that the Western “civilized world” would only recognize raw military power, while “smart defense” and “soft power” were just nice words.[5]
• In September 2012, Foreign Minister Sergei Lavrov told Secretary of State Hillary Clinton, that the foreign aid agency USAID must curtail its operations and leave Russia by October 1. According to Russian diplomatic sources, in June, Lavrov warned Clinton that Moscow wanted USAID out, while the official note of eviction was handed to the US Ambassador in Moscow, Michael McFaul, by Deputy Foreign Minister, Sergei Ryabkov, on September 12. Obviously, this might have been one of the direct reasons for Ms. Clinton’s frustration expressed by speaking of "a new wave of repressive tactics and laws aimed at criminalizing U.S. outreach efforts"[6] during a meeting with the representatives of civil societies held on the margins of the December 2012 OSCE ministerial meeting in Dublin.
• Moscow declared its intention to build an “Eurasian economic region” in Transnistria aiming to prevent the weakening of Moscow’s control over Tiraspol, in a direct response to EU and Moldova’s efforts to attract Trandnistria through economic cooperation. Additionally, Russia allegedly requested during a summit held in Sochi in September 2012 that either Moldova drop the implementation of the EU’s third energy package on its territory or agree to pay $3.5 billion in gas debts claimed by Russia’s energy giant Gazprom, which the state-run gas monopoly deliberately did not collect from Transnistria[7].
• Marcel van Herpen, Director of the Cicero Foundation, argued in a recent online article that the Russian military exercises “Kavkaz 2012”: "directly threatened the existence of Georgia as an independent and sovereign state"[8].  The article quoted Russian experts claiming that those strategic manoeuvres intended to provide training for the breaking of a Georgian blockade against supplying Russian troops in Armenia with fuel in the aftermath of a potential Iranian crisis, which would lead to a complete blockade of Armenia. The Russian authorities have refused to allow foreign observers to oversee Kavkaz-2012. NATO’s Secretary General, Anders Fogh Rasmussen, has publicly called for more transparency, and complained that the Western Alliance was not provided by Russia with reliable information about “the purpose of the exercise, where does it take place, how is it conducted?”[9]

Anything unusual about former comrades wanting to band together ?
The origins of the Eurasian Customs Union (ECU) go back to January 1995, when Russia signed a treaty on the formation of a customs union with Belarus and Kazakhstan (Kyrgyzstan also joined that treaty in 1996, followed by Tajikistan in 1997). A decision to this effect was taken at the Minsk summit of June 2006. In October 2007, the leaders of Russia, Belarus and Kazakhstan signed a second treaty setting up the customs union. The three countries established a Customs Union Commission as a permanently functioning regulatory body and continued negotiating and drafting agreements necessary for the functioning of the ECU. As of 1 January 2010, a common customs tariff was launched and the Commission formally started its work.
In July 2010, the existence of a common customs territory was declared and the Customs Union Code, the key regulatory document, entered into force. In July 2011, the elimination of the internal physical border controls was announced. The three member states were keen to place the ECU within a wider framework for advanced economic integration – a single economic space, followed by an economic union. The former envisaged a common market of goods, capital and labor, and the operation of common macroeconomic, competition, financial and other regulation, including harmonization of policies such as on energy and transport. The idea of further developing ECU by setting up a Eurasian Economic Union (EEU) was raised, and soon gathered political momentum, once Vladimir Putin set it as Russia’s priority.
In November 2011, in their Declaration on Eurasian Economic Integration, the three heads of state announced that the Single Economic Space would be launched as of 1 January 2012. They also proclaimed the establishment of a new body, the Eurasian Economic Commission, which replaced the Customs Union Commission as of 1 July 2012, as the common coordinating institution to ensure the achievement of the agreed objectives. The legal basis of the ECU and the Single Economic Space are to be fully in place within three years so that the EEU could be launched on 1 January 2015.

Economic integration does not necessarily have an enlarged political agenda
The myth of "re-Sovietizing" large parts of the former Soviet Union is not supported by the realities of the ECU so far. However, according to some experts, the project of the Eurasian Economic Union might be evolving towards deeper political integration at some point in the future. The current membership of the ECU is limited to three countries: Russia, Kazakhstan and Belarus. According to high level sources from the Eurasian Economic Commission enlargement is not a top priority, the focus being more on making the customs union mechanisms effectively work for the current membership. Moreover, many leaders of the non-member post-Soviet republics have been mostly reserved if not hostile to joining the ECU. The same sources from the Eurasian Economic Commission reported in a public meeting in Brussels that enlargement may only come up on the agenda when the advantages of the integration of current members will be as obvious as to attract other countries to apply for membership.

This is not the European Union
In contrast to the situation in the European Union, the current decision making process in the ECU is inter-governmental rather than supra-national, as had been the case in the former Soviet Union. When challenged about the effectiveness of the inter-governmental decision making mechanism, the high level source from the Eurasian Economic Commission responded that the present system would be more simple and efficient than that of the EU. Furthermore, establishing a Eurasian Parliament (the potential counterpart of the Supreme Soviet in the former USSR) was not on the agenda of the ECU even though there were many parliamentarians who would be struggling towards this end. A sort of inter-parliamentary dimension of the Eurasian Economic Union (possibly including also members of the parliaments of Tajikistan and the Kyrgyz Republic) would be rather more likely to emerge.
Finally, but not least important from the perspective of the effectiveness of the EEU in generating economic growth, a recent study by the Centre for European Policy Studies assessing the Eurasian integration process against the benchmark of the early stages of the European integration pointed to "a rather uncertain future for the economic integration within the context of the EEU."[10]
However, the EEU project might evolve in the future in a way that might be challenging the European Union as a "normative power" in its "shared neighborhood" with Russia. A briefing paper recently published by the Chatham House stated that: "A corollary of Russia’s aspirations to return to a ‘great power’ status is its claim to hegemony in the ‘near abroad’.  Much doubt has been cast on its status as a rising power. To dispel these doubts, Russia has shifted its focus to a legal, rule-based domain of integration. [...] While both the EU and Russia endeavor to influence this space, ‘what for Brussels is just one of its “neighborhoods” is for Russia the crucial test case which will either prove or dismiss the credibility of its Great Power ambitions’."[11]

Incompatible grand plans can only lead to rivalries
For the moment, it seems that Russia would be keener than the EU to establish a Common Economic Space (CES) stretching from Lisbon to Vladivostok, at least at the declaratory level. According to sources from the European Commission, establishing such a CES would be hardly feasible since Russian trade policy would be inconsistent with the free trade norms of the WTO. In addition, there would be a blatant incompatibility between the Deep and Comprehensive Free Trade Area (DCFTA) agreements, currently negotiated by the EU with a number of post-Soviet states, and the commitments that should be made by a member of the ECU. This incompatibility would place third parties, such as Ukraine, in the uncomfortable position of having to choose between joining the ECU and setting up free trade with the EU.
Another emerging obstacle to starting EU-ECU negotiations on a CES would stem from EU's policy to conclude bilateral agreements with individual states, as third parties, which would be conflicting with Russia's claim that the EU should negotiate any free trade arrangements with the ECU (implicitly with Belarus and Kazakhstan) rather than with individual members. While focusing both Russia and the West on competition rather than on cooperation, the current Russian-European disagreements on the CES are rather creating favorable conditions for turning the myth of "re-Sovietizing" Eastern Europe and Central Asia into reality.
There are at least three core stakeholder messages arising out of the current debate on the Eurasian Economic Union:

“Re-Sovietizing” Russia risks unleashing neo-containment strategies
1. It is for Russia to understand that its current tough stance against the West is counter-productive and is negatively impacting on its own regional integration aspirations. To avoid turning Ms. Clinton's warning about '"re-Sovietizing" Eastern Europe and Central Asia into an "Obama doctrine" for neo-containment of the Russian-led Eurasian integration, Moscow should fundamentally review its foreign and security policies by adopting a cooperative attitude towards the West. Russia doesn't have the economic, financial and even the human resources needed to impose itself as a regional power through blunt military power, as Mr. Pukhov might be dreaming. Economic integration under the threat/umbrella of tanks', fighters' or battleships' fire will hardly work. The more Moscow would delay this review, the likelier is both to scare off potential future members of its Eurasian Economic Union, and to have the West developing and implementing strategies for countering the Russian-led economic integration process.

America’s wider horizons on the Black Sea
2. It is for the US to understand that there is a direct connection between the rather poor status of the OSCE "baskets", lamented by Ms. Clinton at the OSCE ministerial council in Dublin, and Washington's current gradual disengagement from European affairs. If Ms. Clinton spoke for the Obama administration about figuring out effective ways to slow down or prevent the re-Sovietizing of large parts of Europe and Central Asia, Washington should urgently replace the failed policy of “reset” of its relations with Russia with a new strategy focused on the European Eastern neighborhood. This new strategy should build upon the growing regional role of Turkey in the Black and Caspian seas, but also in the Eastern Mediterranean, as well as upon the need to boost EU's regional role and to intensify Black Sea and Baltic Sea regional cooperation. It should also effectively address the protracted conflicts in the South Caucasus and Transnistria together with, rather than against, Russia. And it should make a strategic contribution to European energy security through supporting complementary rather than competing energy flows from Eurasia to Europe.

The EU needs to be realistic about Russia and look forwards, not backwards
3. It is for the EU to understand that being challenged by Russia as "the normative power" in the Eastern Neighborhood is not necessarily bad news for Europe's future. The fact that Russia inspired itself, and tries to replicate the European institutions in line with the actual needs of, and consistent with the different political culture existing in, the republics from the post-Soviet space should be actually hailed by the Europeans as a sort of external validation of the European model for economic integration, which, in the context of the Euro crisis, is being questioned by many in Europe itself. The Russian proposal for building a Common Economic Space with the EU should be treated like a cooperative hand extended to Europe in finding the compromises required by the harmonization of the European and the Eurasian normative systems.
Setting pre-conditions has never worked in meeting the expected outcomes of any peer-to-peer negotiation. Delays in implementing the WTO commitments by one party (i.e. Russia) should not be used as a pretext for preventing discussions on how to best take advantage of the free movement of goods, services, capitals and people from the Atlantic to the Pacific. The EU and ECU Commissions should rather sit at the same table to discuss their differences and how they might be overcome without endangering the integrity of both normative systems. Establishing relations between the EU or ECU institutions and individual members of the other organization, respectively, should be actually promoted as a way to adapt the EU-ECU relations to the actual needs of their members, rather than being prevented by juridical norms. Both parties should find ways to make the extended Free Trade Area work properly rather than trying to stick batons into the wheels of the other.

Bringing the Russians into the Club and “de-Sovietizing” at the same time
At the end of the day, it is in the common interest of both Russia and the West to prevent the myth of "re-Sovietizing" Eastern Europe and Central Asia being turned into reality. For Russia, since its own efforts of economic integration will be undermined by lack of appetite of local political leaders for joining new Empires in whatever outfit they would be disguised, and by possible Western "neo-containment strategies". For the West, since isolating Europe from its Eastern Neighborhood will eventually result in lost economic and security opportunities, a strong stimulus for building bridges uniting Europe and its Eastern Neighborhood rather than (erecting) barriers should be considered. In fact, this is the spirit of the Eastern Partnership and finding constructive ways to involve Russia and other former post-Soviet republics in it would provide the best guarantee against the risks of "re-Sovietizing" parts of the OSCE area.

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