Against the background of Russia's large-scale financial, economic and technological problems due to Western sanctions, the Kremlin continues talking about the presence of “promising” compensatory directions of foreign trade activities, one of which, according to Putin's advisors, is Eurasian direction. Let us try and analyze the real state and “prospects” of the Eurasian Economic Union (EAEU) for 2016-2017.
Today the economy of the EAEU member countries continues to deteriorate against the background of decline of trade and economic relations between Russia and Western countries and the high number of economic imbalances, both at the level of national economies of the member countries and of the association as a whole.
According to the Eurasian Economic Commission (EEC)'s estimates, the main reasons for the deterioration of the economic situation in the Eurasian Economic Union are changes in external terms of trade of the Union and the recession in the Russian Federation, the negative impact of which, due to the interdependence of the member countries, impairs their national economies. In general, in the EAEU there is an accelerated decline in GDP (Belarus, Russia), decline in economic growth (Kazakhstan), increase in the budget deficit (Armenia), weakening of the national currency, decrease in domestic consumer and investment demand and an active outflow of capital (Russia, Belarus, Kazakhstan Armenia, Kyrgyzstan). According to the consensus-forecast (IMF, WB, EBRD) for the economic development of the association, in the medium term the growth of GDP in the EAEU is expected to slow down.
A decrease in mutual trade of the EAEU member countries in 2015 is estimated at 25.8 % as compared with the previous year, and a decrease in the total volume of foreign trade with other countries is 33.6 %. At this, the surplus also fell — to 168.7 billion US dollars (by 29.1 %).
In the overall structure of foreign trade of the EAEU, Russia's share of products continues being the most significant (83.5 %) in comparison with other countries — Kazakhstan (10.4 %), Belarus (5 %), Armenia (0.6 %), Kyrgyzstan (0.5 %). The share of domestic markets of the EAEU countries in the overall structure is only 13.5 %.
At the same time in the overall structure of foreign trade the share of Russian exports in 2015 rose to 63.3 % (60.3 % in 2014), Kyrgyzstan — 1.2 %, Armenia — remained at 0.5 %. For Belarus and Kazakhstan, this figure dropped to 24.2 % and 10.8 %, respectively.
Even without taking into account the Kremlin's geo-political, military-strategic and regional benefits from the “EAEU Idea”, these statistics once again confirm that the official Moscow is using the Eurasian integration exclusively to its own favour. First of all, we can see the Kremlin's desire to compensate the decline in exports of Russian goods to Western markets by exports into other member states of the EAEU, while avoiding an increase in imports to its own market from these countries.
Despite the fact that the volume of trade of the EAEU member countries with the European Union in 2015 decreased as compared with 2014, by 37.6 %, the EU remains the main trade partner for the EAEU countries (48.8 % of the total volume of foreign trade with third countries). Ukraine's share in the structure of trade (in 2015) fell to 3.5 %.
Despite a decrease by 39.6 % in the volume of foreign trade in energy resources in 2015, the latter remain major commodity group, which provides a positive balance of foreign trade of the EAEU (65.6 % of total exports to third countries, of which the Russian Federation's share is 84, 3 %).
According to the EEC's estimates, the main risks which during the next five years will be affecting the macroeconomic stability of the association and the development of its individual member countries on a global level are as follows: decline in prices in world commodity markets, including energy ones; violation of the global balance of oil supply and demand due to the lifting of sanctions on Iran's oil exports; the US Federal Reserve System, influencing the movement of capital between countries and at the regional level — deterioration of the geopolitical situation around Russia; Western countries' continued sanctions against the Russian Federation; developments in the financial and debt sphere of the EU — the main commercial and financial partner of the EAEU; drop in China's stock market and increased uncertainty about China's being able to maintain economic growth at the same level.
These factors have led to a significant increase in the risks of further destabilization of the situation in the financial (due to the reduction in the revenue side of the national budget) and monetary (increased volatility of cross-exchange rates in the EAEU) spheres of the member countries of the Association.
In such circumstances, the EEC experts have acknowledged that the situation in the Union is developing according to the worst of the three possible scenarios, which were calculated by the Commission in the long-term forecast of the development of the Association until 2030. That is, the EAEU will not be able to become its own “power center” or transit commodity “bridge” and “territory for the development of industrial cooperation” between the EU and the countries of the Asia-Pacific region, but will be developing in the “elongated status quo” format with gradual (and such that will depend on the political will of the leaders of the states-“allies”) elimination of barriers to the movement of goods, services, capital and labor force.
Since the beginning of 2016, we can observe how the devaluation of the Russian currency influences the decrease in the volume of imports from other member countries of the EAEU. There have been recorded Kazakhstan's losses in automotive, construction, agricultural and oil export sectors. At this, cash flows from migrants working in Russia are significantly decreased, in particular, for Kyrgyzstan (this figure is 30 % of GDP) it has decreased by 45 % as compared with the previous year, and for Armenia (18 % of GDP, a reduction of 50 %).
At the same time, a serious problem for the EAEU was an attempt to provide the combination of customs regime, acting within the framework of the Union, with conditions, which Kazakhstan has to stick to after joining the WTO. The introduced by the Russian side changes in the rules of governing the single market in order to prevent the possibility of re-export of goods from third countries through the territory of Kazakhstan have actually led to creation of two parallel customs systems. In particular, the regulation of imports to the Kazakhstan's domestic market with low customs duties (in agreement with the WTO) and imports to the EAEU market while maintaining the existing sizes of customs duties. This negatively affects the economic relations within the association and negates the very concept of a single economic space.
At this, the EEC does not exclude the possibility of further deterioration of economic conditions, increasing the risks of use of protectionist instruments, including waivers and limitations within the framework of the EAEU's domestic trade. Thus, the Eurasian Economic Commission today draws attention to Kazakhstan's intention to strengthen the deterrent of import of Russian goods, the growing volumes of which impair domestic producers, as well as to Belarus' initiatives to abandon ruble within the framework of trade with the Russian Federation on certain categories of goods.
Despite the numerous problems of the internal aspects of the EAEU, one of its priorities is to ensure international recognition of the Union and to establish its direct contacts with the United States and the European Union.
At the moment its contacts with the United States are limited to the EEC's officials' participation in events held in the United States, in particular in the meetings with representatives of the American Chamber of Commerce, in the EAEU's presentations in the Cato Institute and the US-Russia Business Council, in events held by the IMF and the World Bank. At this, the American side refuses to establish direct contacts between the members of the Board of the EAEU and the heads of US government agencies.
In September 2015, the EEC appealed to the European Commission with proposals for the preparation of a joint document, which would not have legal force, but would describe common goals and directions of further cooperation. In February this year, an answer came from the Chairman of the EC J.-C. Juncker, stating that the European side would examine possible ways of cooperation between the EU and the EAEU. At this, the final decision of this issue relates to the competence of the EU Member States and will be made taking into consideration “the broader political context”.
The Russian Council on International Affairs, taking into consideration the attitude of Western structures to the EAEU, suggested using one of the tools of public diplomacy and the Kremlin's “soft power” active development of relations with powerful world players (China, ASEAN, MERCOSUR) and individual European countries, which did not support the imposition of sanctions against the Russian Federation (e.g. Serbia and Macedonia, which are supposed to become “mediators” in promoting cooperation with the EU/EC).
Besides, the EEC intends to “increase pressure” on the European Union and to more actively use the EAEU's senior officials' visits to the EU to promote the idea of the need to establish direct contacts at the level of the European Commission- Eurasian Economic Commission. In this context, Moscow was counting on pedaling this issue, as well as questions about “resolving the sanctions opposition to the benefit of all involved parties” by President N. Nazarbayev, who March 30, this year met with the European Commission's President Jean-Claude Juncker and President of the European Council Donald Tusk.
This process is planned to actively involve diplomatic representatives of the member countries of the EAEU, which must hold working meetings with representatives of state bodies of the host country and find out their being interested in the development of relations in the EU-EAEU format.
However, the difficult economic situation of the member states of the EAEU encourages the search for new ways of development of the Association. In this regard, the Eurasian Economic Commission has developed basic guidelines of macroeconomic policy for 2016-2017, aimed at deepening cooperation and intensification of joint efforts of the member states. Their implementation, according to the EEC experts, will help return national economies onto the path of sustainable economic growth through the revitalization and diversification of internal capabilities and use of the EAEU's potential of economic integration.
At the same time, independent experts pay attention first of all to the declarative nature of the EEC's proposals which in the circumstances of destabilization of the situation in the financial (due to the reduction in the revenue side of the national budget) and monetary (increased volatility of cross-exchange rates in the EAEU) spheres of the member countries of the Association, and accumulation of problems at the bilateral level between the member countries of the EAEU will make it impossible to implement the relevant directions of development to the full.
Despite the decline in Ukraine's share in the EAEU's total foreign trade by 5.1 % (to 22.4 %), the Eurasian Economic Union remains the second (after the European Union) trading partner of Ukraine, first of all due to Russia, which is trying to use the Kremlin in relations with Ukraine.
In particular, within the framework of the EEC, on the initiative of the Russian side, there continues the discussion of the EAEU's next steps in the implementation of the new order of registration of the transit of goods from Ukraine and the practical application of the provisions of the RF President's Decree “On Measures to Ensure Economic Security and National Interests of the Russian Federation in International Transit Transport of Goods from the Territory of Ukraine to the Republic of Kazakhstan through the Territory of the Russian Federation”. The final decision on this issue within the framework of the EEC will be taken in the nearest future as a result of analysis of documents and explanations received from Russia's relevant ministries and departments.
With the onset of the economic part of the Association Agreement between Ukraine and the EU, Moscow initiated introduction of enhanced control by the customs authorities of products imported from the territory of our state.
According to the Russian pro-government economists, fulfillment by the Ukrainian side of provisions of the Agreement on trade contains a number of “risks” for the EAEU member states regarding a more complicated control of the possible re-export from the EU, an increase in the volume of imports into the territory of the EAEU of goods produced in the EU, which with violation of “sufficient processing” criteria will be supplied under the guise of Ukrainian products, and will determine the geographical redistribution of the so-called “parallel imports” of goods into Russia, especially from the markets of the UAE, Turkey and China. And given the fact that other countries-members of the EAEU are not joined to Russia in the issue of the suspension of the Agreement on Free Trade Area with Ukraine in the conditions of functioning of the common customs territory and the lack of customs controls at the internal borders of the member states of the EAEU, Moscow does not exclude a possibility of imports into Russia from other countries of the Associations of goods of Ukrainian origin.
At Russia's initiative, at the 18th meeting of the Joint Board of the Customs Services of the member states of the Customs Union (Astana, March 30, 2016), with the participation of the Minister of the EEC on customs cooperation M. Kadyrkulov, were discussed questions of improving the “risks” management system (unification of risk minimization measures, preparation of the EEC's draft agreement on how to proceed in case of introduction of trade sanctions by one of the member countries of the EAEU), were adopted new methods of formation of appropriate indicators and risk profiles. They also discussed introduction of control of Ukrainian goods imported into the territory of the Republic of Belarus and the Republic of Kazakhstan (including within the framework of preferential treatment of the CIS FTA) in order to prevent their further travel to the Russian Federation.
Also today, in the EEC, is being worked on the issue of the future depriving our State of possibility of preferential trade with other CIS countries within the framework of the relevant free trade agreement.
Following the thesis that CIS economic functions are allegedly the same as those of the EAEU, and that all member countries of the Eurasian Union (Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan) are members of both organizations, it is proposed to transfer the authority for economic and finance cooperation from the Executive Committee of the CIS to the EEC.
This will allow to terminate the Agreement on CIS Free Trade Area (in force since 2012) in favor of free trade within the EAEU, to turn the wide association into the organization, which will deal exclusively with humanitarian, scientific-technical and inter-parliamentary cooperation, as well as to cancel duplication of functions of the CIS and EAEU in the economic sphere.
Besides, it is proposed to sign a new agreement on free trade between the EAEU and the CIS countries, which are not members of the Eurasian Association (Moldova, Tajikistan and Uzbekistan). At this, it is pointed out that such an agreement will not be signed with Ukraine due to the principled position of the Russian Federation.
Taking into consideration the relatively large volumes of Ukraine's bilateral trade with the EAEU member states and the actual impossibility for Ukraine to develop full-fledged relations with this Association due to Russia's treacherous behavior, and the Kremlin's ability to rigidly affect the decision-making process within the EAEU, the Ukrainian government and diplomacy's task is to immediately develop and implement “breakthrough (creative and effective) measures in relations with Belarus, Kazakhstan and other interested countries of the EAEU and CIS”, able to neutralize the aforementioned new “hybrid” intentions and plans of Moscow.
