Coronavirus impact highlights weakened state of EEU, say analysts

ALMATY -- The economic fallout from the coronavirus pandemic is only widening fissures between Russia and other Eurasian Economic Union (EEU) member states, observers say.

The EEU, a trading bloc that Russia co-ordinates, is failing to unify member nations during the pandemic, recently wrote Central Asia Monitor, an online publication in Almaty.

"It is time to ask whether this union has a future after" the COVID-19 pandemic, the article stated. "A diminished Russia will no longer be able to keep the EEU partners in the orbit of its interests as it did before."

The relevance of the EEU is coming under scrutiny as plummeting prices for oil, which enjoys little demand during a pandemic and lockdown, undermine the Russian economy. At the same time, trade within the EEU is facing a downturn.

The pandemic will reduce trade among the EEU countries since the states already had limited air and road connections, said Almaty political scientist Zamir Karajanov.

In addition, the growth rates of member states' economies are expected to slide as well, he said.

Trade between member states already had been falling in recent years because of problems both within the economies of the member states themselves and within the EEU. The pandemic will only exacerbate the economic frictions among the countries, Karajanov said.

Even before 2014, when oil prices were above $100 a barrel, Russia's GDP growth rates were the lowest in the BRICS group, which consists of Brazil, Russia, India, China and South Africa, he said. However, its government made no structural reforms at that advantageous time and most likely will not enact them now either, he said.

"In all likelihood, the country will eat through its financial savings, as it did after 2014," he added.

"You could say that Russia isn't being weakened by the coronavirus or rock-bottom oil prices but by the development model it chose," he added.

Following a significant drop in oil prices in 2015, Moscow changed its economic strategy, resorting to large-scale cost cutting and budget savings. It also has reeled from Western sanctions imposed after the Kremlin's illegal annexation of Crimea in 2014.

Unfair practices

For Ulan Saimaliyev, a farmer from Chui Province, Kyrgyzstan, Russia can blame only itself for the the weakened state of the EEU after the bloc instituted unfair trading practices.

Russia returns hundreds of tonnes of produce to Kyrgyzstan every year, citing alleged non-compliance with EEU food safety requirements.

"The phytosanitary oversight service of Orenburg Province in Russia is constantly rejecting imports of Kyrgyz food even though our country is a member of the EEU," Saimaliyev said.

"As a result, we incur losses. Why do we need such a union?" he asked.

During the pandemic, neighbouring Kazakhstan is accommodating business and freely accepting food from Kyrgyzstan, having rescinded customs duties on it, while Russia has shut itself off from its EEU partners, said Saimaliyev.

The EEU has taken an approach of responding case by case to challenges, where each country proposes its own solutions, said Tolganai Umbetaliyeva, director of the Central Asian Foundation for the Development of Democracy in Almaty.

Kazakhstan, acting on its own, has suggested reducing customs duties, but no discussions within the EEU on jointly finding a way out of the pandemic have occurred, she said.

"The EEU needs to internally examine the fairness of the rules that it previously adopted ... given that the countries differ sharply in economic terms," Umbetaliyeva said, pointing to Russia's dominant position.

Russia is demonstrating minimal openness in its economy, arousing continued dissatisfaction among partner countries, she added.

"At the moment [Russian President Vladimir] Putin is more occupied with his political future, and the future of the EEU is not on that agenda," Umbetaliyeva said.

Time to leave the EEU?

The EEU is no longer relevant and has no future, said Islam Kurayev, a political analyst in Almaty.

As members of the EEU, "our countries have fallen behind the entire world technologically and economically. We can't provide ourselves with the basics," he said.

"According to the objectives of the EEU, we were meant to create a strong economic bloc. But what was the outcome? The existing businesses in Kazakhstan fell apart; we couldn't withstand the competition," Kurayev said.

That collapse was attributable mostly to the close intertwining of the Kazakh and Russian economies and currencies, he said. When sanctions, inflation and devaluation hit Russia, Kazakhstan feels the impact too, Kurayev said.

"We are slowly destroying ourselves, while the country has been turned into a colony for the sale of [Russian] goods," he said. "If we want to break through, it is time to reject the old ways and start living in a new way."

Now is the most appropriate time for Kazakhstan to leave the EEU, he said.

In reality, the EEU has no economic mission but rather is a political project of Russia to strengthen its influence over the post-Soviet region, said Rasul Zhumaly of Almaty, a political scientist and member of Kazakhstan's National Council of Public Trust.

"An excellent alternative to the EEU for Kazakhstan would be to step up its economic co-operation with the Central Asian countries," he said.