Caravanserai
Economy

Russian push to expand EEU seen as effort to deepen unequal gains

By Ksenia Bondal

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The EEU discussed creation of a unified customs transit system at a high-level meeting in Minsk, Belarus, on October 21. [EEC]

ALMATY -- Russia's continued push to expand the Eurasian Economic Union (EEU) holds few benefits for Central Asian members, say experts.

The EEU's members include Russia, Kazakhstan, Kyrgyzstan, Armenia and Belarus.

In the latest move aimed at expanding the union, the Kremlin-controlled Eurasian Economic Commission (EEC), the EEU's regulatory body, has been trying to expedite the signing of an agreement to create a unified customs transit system.

A corresponding draft agreement was already discussed at a high-level meeting of the EEC board on October 21, the EEC reported.

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The EEC board meets virtually on October 19. [EEC]

While details on the document are scant, the agreement allows countries that are not part of the union to join the system.

"The document contains the main elements of the customs transit procedure and a description of the guarantee mechanisms, which will make it possible to apply the procedure to third countries," the EEC said in a statement.

Such an agreement would allow Russia to track and tighten control on the movement of goods in the EEU, according to Yerkin Daiyr, a Kazakh economist who lives in Prague.

Under the unified transit system, Russia could dictate the rules in member states, which apparently was part of its plans during the EEU's founding in 2015, he said.

For example, Moscow could thwart the export of Kazakh products to Ukraine, a country that Russia invaded in 2014, or choke off the flow of Chinese goods that enter the EEU through the Kyrgyz border, Daiyr said.

Worrisome expansion

The expansion of the EEU is particularly worrisome for Central Asian countries, which see far fewer benefits from their membership than Russia does, according to observers.

"It is clear that the beneficiary of the gains from the EEU -- from the formation of the Union's single market -- is definitely Russia," Arman Beisembayev, a financier from Almaty, told Caravanserai.

During the negotiations that preceded the EEU's launch, Kazakhstan had hoped that things would turn out differently, according to Beisembayev.

Kazakhstan had hoped "that Russia would open its own market, to which we would sell our goods, to which our workers would flow, and that we would make money in this union", he said.

The reality was different, however.

Russia is building an imperial policy, he said. It acts as the metropole or "queen bee", while Kazakhstan and other member states languish on the periphery.

In that regard, Russia "sucks up resources from the periphery. And that's how it will be in the EEU", he said.

"Kazakhstan will not be able to escape its neighbourhood. We got into the EEU thanks to our naivety, and now we have to sit down and shut up," Beisembayev added.

The benefits of the EEU "are distributed unevenly", agreed Evgenia Pak, lead analyst at the Applied Economics Research Centre in Nur-Sultan.

"That's why, 89% of Kazakhstan's exports ... and 94% of its imports from EEU countries are attributable to Russia," she told Caravanserai.

"The EEU must be built ... on the principles of mutually beneficial co-operation, which implies both co-ordinating economic decisions and respecting the independence of the countries that join", said Pak.

Co-operation and integration within the EEU have weakened, including between Russia and Kazakhstan, according to Pak, with one reason being the socio-economic crisis caused by the COVID-19 pandemic.

"The main limitations of co-operation include clashing macroeconomic policies and the high volatility of member states' currencies, as well as the structure of the EEU economy, in which extractive industries reign," she said.

"All this happened before, but it was especially pronounced during the pandemic."

Politicisation

Moscow, meanwhile, has attempted to use the EEU to expand its political clout in the region.

Earlier this year, Kazakhstan rejected a proposal by Moscow that called for members of the EEU to more closely co-operate outside the economic bloc.

The proposal, known as the Strategic Directions for the Development of Eurasian Economic Integration for 2025, was discussed during a meeting of the Supreme Eurasian Economic Council (SEEC) on May 19, the press office of Kazakh President Kassym-Jomart Tokayev said in a statement on its website. The SEEC is the EEU's highest-ranking body, comprised of EEU member states' heads of government or heads of state.

Tokayev rejected the proposed draft, noting that the document included topics that went beyond economic issues, such as health care, education and science.

"The full inclusion of [such] issues... in the competence of the [EEC] can significantly change its economic orientation; in other words, it will contradict the essence of the 2015 treaty on the establishment of the EEU," he said during the summit, according to his press office.

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