Political-economic problems of integration within Eurasian economic union

In this article the authors examine such issues of Eurasian Economic Union (EAEU) as an extension of the boundaries of integration, internal contradictions and prospects of the regional association. We analyze the problems of integration within the EAEC, as well as its interaction with other CIS countries and far abroad. It is shown that the main problems of integration within the EAEC are the main raw material orientation of the economy of the participating countries (Russia, Kazakhstan); predominance national interests over the interest of the Union; because of the vast territory, a large number of population, economic potential, powerful army and other benefits, the natural elevation of the status of Russia among the allies, reinforcing its influence; multi-speed pace of development of the countries participating in the EAEC. The authors comprehensively investigated the current state and problems of the EAEC using different methods of political analysis (comparison and systems analysis, content analysis, event analysis, SWOT-analysis, etc.). In quite a sharp polemic form, based on reliable empirical data, the article shows not only the integration of interaction, but also competition within the EAEC.

EurasianEconomicUnion (further - ЕАEU) is a new international integration economic unionwhich has an international legal personality. It was created with the structure of Russia, Belarus and Kazakhstan after the termination of Euroasian economic community (EurAsEC) activity. ЕАEU is the biggest integration association by the territory. According to Euroasian economic commission data, ЕАEU occupies the first place in the world on reserves of natural gas (20,7 percent from a world share), the first place on oil reserves, including gas condensate (14,6 percent from a world share), the third place in the world on electricity generation (9 percent from a world share) and the fourth place in the world on coal reserves (5,9 percent from a world share) [1].

The President of Kazakhstan N. Nazarbayev estimates an aggregate effect from expansion of integration at 900 billion US dollars ($) till 2030. We would add, that the union has the general customs territory, and total GDP of the countries of EEU makes 85% of a gross product of all CIS countries and reaches $2,5 trillion, industrial potential is estimated at $600 billion, volume of production of agriculture in $112 billion [2].

The EEU creates the conditions for a geopolitical choice not only at the certain CIS countries, but also at the European Union.

According to V.V. Putin: "The geographical position of the countries of "three" allows to create transport, logistic routes not only regional, but also global importance" [3].

Expansion of the Euroasian economic union is a necessary condition of growth of the importance of this integration formation in the world. Leaders of the State Parties of EAEU declare the interest in expansion of the organization and take practical steps in this direction. Thus, on January 1, 2015 the contract on creation of EEU came into force. The main objectives of EAEU are:

  • the creation of conditions for sustainable development of economies of the state members in interests of increasing the living standards of the population;
  • an aspiration to formation of a uniform commodity market, services, the capital and a manpower;
  • comprehensive modernization, cooperation and increasing of national economies

Armenia officially entered EAEU on January 2, 2015. The contract on accession of the Republic of Armenia to "The contract on the Euroasian economic union from on May 29, 2014" was signed in Minsk on October 10, 2014. The government of Armenia lays hopes on EEU because it will allow increasing considerably the market for the Armenian goods at once. Within the program of EEU the budget of the country will receive millions of US dollars in the form of grants, grants and the credits.

At the time of the entry of the Republic of Armenia into EEU the level of influence of the Russian capital and the Russian management in national economy was incredibly high.

Current situation also does not promise anything good to those Armenian producers whose the main market of export is Russia.

Judging by data of Customs service, Russia is the main market for the following Armenian export goods: alcoholic beverages (generally cognac and wine), fish (generally a trout and a sterlet, crayfish), vegetables, fruit, dried fruits, fruit juice, mineral water, carbonated drinks, beer, dairy products (generally cheese), diamonds, precious and semiprecious stones, jewelry, coal, ore (in a small amount). Except Russia, there are no other sales markets of production exporters [4].

Nevertheless, current crisis of the Russian economy will effect on Armenia. With considerable deficiency of the Armenian budget in 10% of GDP any reduction of the income will be very painful. Russia imports the fifth part of the Armenian export. Besides it, 80% of money transfers from Russia come to Armenia which are the citizens who left Armenia for earnings. Dependence of the Armenian economy on the Russian market is very great therefore the situation that affecs the Russian ruble will also concern Armenian dram. Currently, the monetary transfers from the Russian Federation to Armenia has already considerably reduced. The volume of direct investments during the similar period of last year made 69,6 billion dram, thus, reduction of volumes of direct investments in the first quarter of the current year in an annual section made 34,3 billion dram. And in a dollar ratio the volume of foreign investments was reduced almost by 70% [5].

Kyrgyzstan has signed the contract on the accession to EAEU on May 8, 2015. The entry of Kyrgyzstan in the Customs union has been postponed for several times. The reason of difficulties of the entry of Kyrgyzstan into EAEU is rooted, first of all, in big dependence of economy of the republic on re-export of goods, first of all to Chinese, to a lesser extent – Turkish ones. During the independence years Kyrgyzstan spontaneously has come to model of an economic survival of the transit country. It was promoted by the liberal legislation, weakness of law- enforcement system and high corruption. The most part of the income of the Kyrgyz budget is formed due to payments which are levied from importing and exporting production. Low customs rates provide low cost of import production. As a result Kyrgyzstan began to position itself as the regional transport and trade knot focused, first of all, on the Chinese goods. All this is complicatedly combined with the basic ideas of the Customs union of EAEU. Requirements of EAEU assume an increase of customs duties rates on import almost twice. It is fraught with decrease in commodity turnover of the republic with foreign countries and sensitive increasing of consumer prices of many types of goods. Besides, after the accession to EAEU it would be difficult for Kyrgyz enterprises to compete with large business of member countries. The countries of EAEU recognize the re-export problem. At negotiations on accession of Kyrgyzstan to the union it was elaborated the "road map" which is urged to soften consequences of reduction of re-export of the Chinese production for republic economy. it was highlighted the range of goods for which there would be given the preferences. For compensation of economic expenses from the accession to EAEU it is supposed granting a soft loan to Kyrgyzstan at the rate to 1 billion US dollars, and also, Russia expressed readiness to write off a debt of Kyrgyzstan for total amount to 0,5 billion dollars. However refusal of economic model of the transit state remains a difficult choice for Kyrgyzstan. However such choice in exchange gives the chance of receiving duty-free access of the Kyrgyz production to the markets of EEU; reduction of cost of the raw material resources delivered from the EEU countries; growth of investments from the states of EEU; legalization of labor migration from Kyrgyzstan to the EEU countries.

Thus, it is necessary to consider that for allies the entry of Kyrgyzstan into EAEU is interfaced with certain geopolitical risks for partners in the union. Kyrgyzstan has extended border with China and Tajikistan which crosses the mountain district and is almost not controlled. After the entry of Kyrgyzstan into EAEU it became the general border of the union, and it means that the stream of illicit goods will be able freely to come to Russia. Tajikistan in turn has the border with Afghanistan. If unprotected border with Tajikistan became external border of EAEU, this will threaten the increasing of a drug traffic from Afghanistan through Tajikistan. At the same time the part of border between Kyrgyzstan and Tajikistan is not coordinated that leads to continuous border incidents.

Economic problems of state members of EAEU

The full functioning of EAEU assumes the coordination of economic policy of member states concerning the key industries. It includes the macroeconomic and financial sector, transport and power, the industry and agro- industrial complex, trade and so forth.Oon January 1, 2012 17 there were incorporated the basic international agreements urged to form the basis of the Common economic space. Each of these agreements provides integration of economy of member countries of EAEU.

We have already exhaust еру effect from cancellation of customs control and free trade. Therefore further growth is possible now mainly at the expense of the market of services, the capitals and labor. We should nщt forget that only the market of services is more than a half of GDP of each of our states. Nevertheless, it does not not necessary mean that all problems of interaction in the sphere of trade are already completely solved.

First, several years of integration interaction allowed us to find a number of the problems demanding change of former approaches. Therefore, in particular, there was made a decision on preparation of new edition of the Customs code of the Euroasian economic union. The given document contains too many references to the national legislation of member countries, and it constantly creates confusion and confusion. Businessmen are sometimes not able to understand: how exactly they have to process accompanying documents for export and import of freights.

Secondly, none of our integration association members are not going to refuse those natural advantages which we possess owing to abundance of minerals in our subsoil and the huge areas suitable for farming. In the conditions of barefaced sanctions pressure these resources just are also able to afford to fill a lack of investment means.

At the same time, it is difficult to consider EAEU as an alliance equal members not only because of the different economic potential of its participants, but also because of their various interests. Of course, the leading role of Russia in EAEU is indisputable. The territory and population of Russia is much more, than Kazakhstan and Belarus. Therefore it is necessary to consider that Russia is too great for effective integration within EAEU. The economy of three member countries strikingly differs by the sizes: to Russia 87,9% of GDP, are the share of Kazakhstan – 9,2%, to Belarus – only 2,9%. All this direct influences the success of the integration project. But, at the same time each member country has the motives and priorities for economic integration. If to compare to the EU, in Europe the countries with approximately identical and rather high level of development of market economy and democratic institutes were integrated, which one might not speak about the participants of integration at the former Soviet Union. It is necessary to emphasize that during promotion of the project of EAEU Its initial plan has changed. The Ukrainian events, the international reaction forced Russia to be more careful at negotiations with Belarus and Kazakhstan. It is important that such questions as the general nationality, foreign policy, the general protection of borders, idea of the general parliament, the passport and visa sphere, export control are excluded from the final contract. According to Kazakhstan offer, there were withdrawn the points on closer coordination of military and technical policy and a measure for protection of interests of the compatriots by Russia in other countries. Also, there were recorded mutual macroeconomic restrictions at EAEU.

Today it is evident the sharp crisis in the relations of the West and Russia, series of the mutual sanctions which accumulated on falling of a rate of Russian ruble and prices of oil in the world markets. In 2014 the cumulative growth of GDP of the states of the Euroasian economic union made only 0,9 percent. In the current year some recession is predicted for approximately 1,4 percent. Below, are given the concrete data of export import in the Customs union, the predecessor of EAEU [6].

Table 1 - Dynamics of foreign trade of the Russian Federation with the Republic of Kazakhstan

million. US dollars 

 

 

2010 y.

 

2011 y.

 

2012 y.*

 

2013 y.*

2014 y.*

 

January- May 2015 y.

year

January- May

Commodity turnover

15139,7

20677,7

25799,6

23519,0

21050,8

8543,4

6580,9

 

 

 

2010 y.

 

2011 y.

 

2012 y.*

 

2013 y.*

2014 y.*

 

January- May 2015 y.

year

January- May

% to previous period

117,9

136,6

124,5

91,4

89,5

 

77,0

Экспорт

10690,3

14098,7

15728,4

17632,2

13891,6

5540,9

4394,0

% to previous period

116,9

131,9

111,3

112,1

78,8

 

79,3

Импорт

4449,3

6579,0

10071,2

5886,7

7159,2

3002,5

2186,9

% to previous period

120,3

147,9

152,8

58,4

121,6

 

72,8

Сальдо

6241

7519,7

5657,2

11745,5

6732,4

2538,4

2207,1

Specific weight generally t / about the CIS in %

16,6

16,6

19,0

20,9

22,0

18,8

23,2

Due to the formation of the Uniform customs territory terms export/import are replaced with the term of delivery.

The statistics of foreign and mutual trade of the countries of EAEU on the results of 2015 year demonstrates the falling of the majority of indicators. Considering an acute crisis in the relations between the West and the largest economy of the HARDWARE – Russia, followed by large-scale curtailment of financial and economic communications, falling of volumes of trade is not surprising. At the same time there it happened suddenly and different branches of economy of Union States suffered from it unequally.

Falling of volumes of export and import in the countries of EAEU was uneven. The volume of foreign trade of Kazakhstan which export fell to 7,3%, and import – was most strongly reduced by 11,2%. In the victim from sanctions of Russia the volume of export decreased only by 5,3%, and import – for 9,5%. In Belarus which imposition of sanctions against Russia affected a little, export last year increased by 3,5%, and import was reduced by 9,1%. Growth of the Belarusian export was connected with increase in deliveries of production of chemical industry (for 27,2%), metals and products from them (for 16,8%), and also wood and pulp-and-paper products (for 25%). The Kazakhstan export fell due to decrease in foreign sales of mineral products (to 6,3%) and metals (for 17,2%). Falling of the Russian export was connected with decrease in deliveries of mineral products (for 6,6%) and chemical production (for 3,1%) whereas sales of metals and products in foreign markets even grew from them (for 1,5%). Besides, Russia and Kazakhstan following the results of last year showed increase in export of the food (for 17,6 and 5,1%) [7].

Rate fluctuations of national currencies negatively affected the cost volume of the Russian and Kazakhstan export. Decline of Russian ruble and tenge in relation to dollar and euro led to reduction of currency revenue and, as a result, decrease in the export income of Russia and Kazakhstan which main article of export are oil and gas resources. It is remarkable that in Kazakhstan the share of mineral products in structure of export even is higher, than in Russia (84 against 72,4%). Probably, in this regard, falling of volumes of the Kazakhstan export was in terms of money higher, than in Russia. Belarus which has no own oil and gas resources, suffered from fluctuations of exchange rates much less. About that decrease in trade of the HARDWARE with the third countries last year was in many respects caused by "currency wars" which had political background and were caused by aspiration of the USA and their allies to put economic pressure Russia, says also that fact that without fuel and energy resources the volume of foreign trade of the HARDWARE fell to only 2,3%.

Disturbing signal is that fact that "inner-union" trade was reduced more strongly, than external. Following the results of last year commodity turnover volume between the countries of the HARDWARE decreased by 11% and made 57,4bln. dollars. It is connected with import substitution processes which are caused by such factors as the sharp rise in price of import goods which made the "allied" industry of more competitive, and also curtailment of military and technical cooperation between Moscow and Kiev which shipped the Ukrainian mechanical engineering in deep crisis and stimulating increase in production of similar production in Russia.

Despite the general stagnation of GDP, following the results of 2014 in Russia revival of manufacturing industry and the agrarian and industrial sphere was observed. The producers of steel pipes who were earlier experiencing the strong competition from the Ukrainian enterprises increased release by 14%. Noticeable growthwasshownbythefoodindustry [8].

As import substitution from the third countries was a source of growth of the Russian industry, it had no special impact on inner-union trade. Following the results of 2014 the volume of the Russian-Kazakhstan trade (by 20,7%) whereas falling Russian-Belarusian (for 5,3%) and Kazakhstan-Belarusian (for 2,4%) commodity turnover was not so strong was most strongly reduced. Decrease in trade between Kazakhstan and Russia was caused, first of all, by reduction of the Russian export connected, probably, with strong devaluation of the Kazakhstani tenge. As a result of delivery of the Russian goods to Kazakhstan were reduced by 23,6%, that number of fuel and energy products – by 2,5 times, metals – on 1/3, production of chemical industry – for 8,8%, foodstuff – for 11%. At the same time deliveries of the Russian cars, the equipment and vehicles increased by 1,5%. The Kazakhstan export to the Russian Federation was reduced not so considerably. Deliveries of mineral products decreased by only 1%, metals – for 14,3%, chemical production – for 5,2%. Almost twice (to 42,7%) deliveries to the Russian Federation of the food fell, but its share in structure of export makes only 5,4% [9].

The Kazakhstan export to Belarus was cut almost by half because of sharp falling of supply of metals (by 2,5 times), and also cars and the equipment (by 2,3 times) with a simultaneous growth of trade in fuel and energy resources (for 38,8%). The Belarusian export to Kazakhstan grew by 0,8% at the expense of increase in deliveries of the food (for 7,8%), mineral products (by 2,1 times) and metals (for 8,5%). It is worth referring decrease in deliveries to Kazakhstan of production to negative tendencies Belarusian machine-building (for 3,9%) and chemical (for 16,9%) the industries. To Russia Belarus became 1/5 less to deliver cars and the equipment, for 11,2% – chemical production and for 12,2% – metals. Thus deliveries of the Belarusian food to the Russian Federation increased by 0,9%, and fuel and energy production – for 17,8%. The Russian export to Belarus decreased because of falling of deliveries of production of energy industry (by 5,8%) and metals (for 18,3%) whereas cars and equipment it was put 1/5 more, and the food – for 13,7% [10].

Despite the decreasing of volume of trade, crisis opens the new opportunities connected about import by replacement, creation of new productions and development of agriculture before the EAEU countries. That fact that the volume of mutual trade was reduced one and a half times more, than external, speaks about insufficient development of internal production and cooperation between the union countries. Elimination of these "gaps" can become strong incentive of economic growth for all Union States. Therefore, heads of states of Russia, Belarus and Kazakhstan discussed including those measures which have to help to soften negative consequences of crisis for the population. It was decided to promote development of real sector of economy and stimulation of employment of the population. For example, adoption of the concept of formation of common markets of the electric power, gas, oil and oil products is planned. Thus, external pressure not only didn't stop integration, and even stimulated its deepening and expansion in the new directions of cooperation. It isn't casual that allies decided to work measures for coordination of monetary policy and about possibility of formation in the long term of the currency union. It would allow to smooth the problems connected with rate fluctuations of national currencies. In other words, our association develops both in breadth, and in a qualitative sense. And the rage of our ill-wishers just testifies to their vigilance. After all it is difficult not to notice progress of EAEU. As it is difficult not to see gradual formation of the new center of force competitive I Will sink down.

However the project of the Big Euroasian union generates some questions. First, integration of the former Soviet Union means presence of the undisputed economic and military-political leader as which Russia acts here. Besides, such integration allows Russia to resolve not so much economic problems, how many to create "a safety belt" around from the friendly states which don't enter the menacing military-political blocks. The prospect of entry into the Euroasian union of such giants as China and India, completely changes a deal in association.

Secondly, the relations between some alleged participants of the Big Euroasian union are intense or even frankly confrontational. It is enough to mention the relations between China and Vietnam, especially between India and Pakistan, Armenia and Turkey. It is difficult to present these countries within one integration project. In our opinion, you shouldn't perceive agreements on free trade between EEU and the states outside the Post-Soviet world as a prolog of creation of deeply integrated association. Signing such contracts, Russia seeks to compensate expenses from sanctions of the West in a new foreign policy situation. Thus the idea of raznourovnevy integration is adopted. In further regional integration priority for Russia and its partners in EEU is a former Soviet Union as on a game costs not only economic well being, but also safety of the countries.

Summing up it is possible to claim, despite different contradictions in views and positions, both the present participating countries of the union, and future members of integration association, expansion of EEU is obviously important a condition of strengthening of positions of this integration association on the world scene. At the same time, expansion of EEU faces problems which are caused by the crisis phenomena in economies of the states of the union, sanctions concerning Russia, fear of the young Post-Soviet states to lose part of the sovereignty and the competition of the Euroasian project with the project of the European integration. One of these problems have a temporality, others represent a long-term obstacle.

Potential of partners in the Euroasian economic union is enormous. Four countries – Russia, Kazakhstan, Belarus and Armenia together win first place in the world on oil and gas production, the second place – on production of mineral fertilizers, the third place on electricity generation, cast iron smelting, collecting wheat and potatoes. For this reason by EEU no sanctions should frighten. In new circumstances a problem of Russia is the belief of potential participants of EEU that integration corresponds to their national interests. In the circumstances in further expansion of EEU the key place is allocated for the states of Central Asia. Integration with them is beyond exclusively economic feasibility and pursues also the aim of ensuring stability and safety at the southern boundaries of the State Parties of the Euroasian integration.

 

  1. Euroasian economic integration: figures and 2014. Page 14. http://www.eurasiancommission.org/ru/Documents/broshura26_RUS_2014.pdf.
  2. Russia, Belarus and Kazakhstan united in the Euroasian economic union//the Russian – 2014. – May 30.
  3. Putin V. Performance at a meeting of the Supreme Euroasian economic council in narrow structure//http://www.putin-today.ru/archives/3707
  4. Mass media of Armenia: Armenian dram on a threshold of new The review of publications about Russia, on August 24-30, 2015//http://inosmi.ru/overview/20150902/230010294.html
  5. Economic everyday life of Armenia//http://regnum.ru/news/economy/1930162.html 6 Data of a portal of the external economic information//http://www .ved.gov.ru
  6. The analysis of a condition of foreign trade of the Republic of Kazakhstan for JSC National Export Agency and Investments KAZNEX INVEST//http://export .gov.kz/storage/ec/ec9701639de1f0a52c56ea8871e64f44.pdf
  7. Information on economic and social situation of Russia - Federal State Statistics Service//http://www.gks.ru/bgd/free/B14_00/Main.htm
  8. Results of trade and economic cooperation between the Russian Federation and Republic of Kazakhstan//http://www.rustrade.kz/torg_ek.htm
  9. About foreign trade of Republic of Belarus with the Russian Federation//http://www.ved.gov.ru/exportcountries/by/by_ru_relations/by_ru_trade/
Year: 2016
City: Almaty