What Central Asia Gets (Or Doesn’t Get) Out Of Putin’s Eurasian Economic Union
Vladimir Putin makes a trip to Kazakhstan, Kyrgyzstan, and Tajikistan on February 27-28. Two of the countries — Kazakhstan and Kyrgyzstan — are members of the Russian-led Eurasian Economic Union (EEU), and Tajikistan is currently negotiating entry into the organization. The EEU is bound to be on the agenda when Putin meets with all three Central Asian leaders.
The EEU, which besides Russia, Kazakhstan, and Kyrgyzstan also includes Armenia and Belarus, has seen mixed results since it was formally launched at the start of 2015. There have been complaints but there have also been some benefits.
To take a look at how the EEU has influenced the situation in the Central Asian states that are members, RFE/RL assembled a Majlis, or panel, to discuss some of the successes and failures of the EEU so far, and the prospects for the organization going forward as Tajikistan prepares to become a member.
Moderating the discussion was RFE/RL Media Relations Manager Muhammad Tahir. From Bishkek, Edil Baisalov, a political analyst and chief of staff in former Kyrgyz President Roza Otunbaeva’s administration joined the talk. Taking part from London was John MacLeod, a senior CIS analyst at Oxford Analytica. From RFE/RL’s Kazakh Service, known locally as Azattyq, Assem Tokaeva participated. I had a few things to say also.
The idea of some sort of Eurasian union has been around for more than 20 years. Kazakh President Nursultan Nazarbaev first spoke of such an organization in 1994 and there have been several attempts at forming some sort of single economic space within the Commonwealth of Independent States (CIS) since then.
Putin resurrected the idea and has been pushing it since 2011. On January 1, 2015, Russia, Belarus, and Kazakhstan, which had been members of a predecessor economic bloc called the CIS Customs Union, launched the EEU. Armenia officially joined the next day and Kyrgyzstan became a member in August that year.
The EEU has thus far not provided the sort of economic boost to its members that member states expected. But MacLeod explained the launch came at a bad time.
“It started at a time when Russia’s economy went into decline and Russia’s relationship with the West deteriorated sharply,” MacLeod noted.
As Tokaeva pointed out, in Kazakhstan’s case “the balance of trade is unfavorable to Kazakhstan, according to [the] statistics, exports to the union countries in the last nine months of 2016 were about $3 billion, against $6.5 billion of imports, and actually the export numbers are 31.6% lower than in 2015.”
Baisalov said: “The shock to our [Kyrgyzstan’s] economy was stronger than we expected and so far our losses have outweighed benefits.” He mentioned, “In 2012, in the peak year of our garment industry, we produced [goods worth] $204 million, then last year we produced only around $9.6 million.”
Baisalov said part of the problem was that “thanks to the devaluation of the Russian ruble, we believe that lots of our industry not only shut down but actually relocated to Russia.”
Upside For Kyrgyz Migrants
Of course, there has been one very important benefit of EEU membership for Kyrgyzstan as Baisalov noted. “A positive result, if you want, comes with our labor migrants in Russia who are now different from migrants from Uzbekistan and Tajikistan,” he said.
Remittances from Russia to Uzbekistan and Tajikistan have been falling drastically since 2013. There has been a decrease to Kyrgyzstan also, but according to Russia’s Central Bank, during the first nine months of 2016, Kyrgyz migrant laborers in Russia sent back $1.286 billion, a 21% increase compared to 2015, and the number of migrant laborers going to Russia from Kyrgyzstan increased while for both Tajikistan and Uzbekistan the figures continued to show reductions.
That will likely make EEU membership more attractive to Tajikistan. About one in every eight citizens of Tajikistan works in Russia and Tajikistan has the dubious distinction of being the most remittance-dependent country in the world, according to the World Bank.
But in terms of trade within the bloc, the EEU is still far from fulfilling its promise, according to Tokaeva. “We observe a lot of evidence of [unresolved] issues among the members of this union and we still do not see this single market as it was declared,” she said.
Russia is the dominant partner in the EEU and Belarusian President Alyaksandr Lukashenka and Kazakh leader Nursultan Nazarbaev have expressed dissatisfaction in the past at Russia’s habit of arbitrarily implementing new regulations without consulting EEU partners.
“We have a small number of economies here, we have one absolutely dominant economy, the Russian one,” MacLeod said. But he went on to say that part of problem for the EEU is that the foreign policies of individual countries are at times significantly different and this complicates their economic cooperation.
“A structural defect of the Eurasian Union that differentiates it from the European Union is that it can’t really operate as a kind of external player because the members don’t genuinely have a common position on say, Ukraine,” MacLeod said.
The brief Russian spat with Turkey in the wake of Ankara’s downing of a Russian warplane along the Turkish-Syrian border in November 2015 was another example of the problems the EEU faces.
Kazakhstan and Kyrgyzstan have close trade ties to Turkey and Russia’s temporary decision to close its borders to trade coming from or going to Turkey complicated the situation for Central Asia in general, but certainly made things difficult for the Central Asian EEU members.
Another complication for the Central Asian EEU members is their relationship with China. Beijing is a leading, if not the leading, investment and trade partner with all the Central Asian states. And now China is pushing its One Belt One Road (OBOR), a massive trade project that foresees linking dozens of countries by road, rail, and maritime routes.
EEU regulations present obstacles to Kazakhstan and Kyrgyzstan’s trade with its giant and rich neighbor but at the same time, as MacLeod said, the Chinese have shown “they can actually deliver when they decide to build something.” The oil pipeline from Kazakhstan to China, the gas pipelines from Turkmenistan through Uzbekistan and Kazakhstan to China, the new railway from eastern Uzbekistan to a location near the capital, Tashkent, and newly paved roads in Kyrgyzstan and Tajikistan are proof of this.
The Majlis discussed these issues in further detail and also looked at the some of the other aspects of EEU regulations and how they are forcing the Central Asian members to change their policies.
Copyright (c) 2015. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave NW, Ste 400, Washington DC 20036.