The influence of the eaeu integration process on the caspian region

Abstract. Considering the fact of geopolitical transformations in the Caspian region, which include changes in the balance of power in the Caspian energy “solitaire” and the process of breaking Iranian isolation regime, special attention should be given to a new form of interaction between Kazakhstan and Russia established through the activity of the Eurasian Economic Union (EEU). It should be highlighted that the influence of the EEU integration factor on the further development of the Caspian region remains poorly understood.

The paper was conducted by using the structural-functional approach and functionalist analysis, which allow both to identify possible forms of cooperation between the countries of the EEU and the countries' of the Caspian Five in areas such as energy, economy and transport, as well as to define prospects of expanding economic cooperation in the Caspian region. As a result of the work done, it became possible to conclude that the EEU integration factor would have targeted influence on the interaction of the Caspian Five in the middle-term perspective.

Introduction

The countries of the Caspian Basin currently become increasingly oriented to implementation of the regional cooperation potential for which the need has increased as a result of changes in conceptual approach to the plans concerning further development and formation of the region. Understanding of the fact that initial orientation solely on an increase in productivity of oil and gas extracting complex in most cases doesn't promote deepening of interregional cooperation level in the Caspian Sea has led to revision of the national priorities realized by the coastal countries in the Caspian territories. Systematic expansion of a social and economic component of the Caspian strategic direction has been an examble.

The heads of the Caspian states increasingly appeal to the need to strengthen intraregional economic interrelations by building trade and economic interaction in a five-sided format. Moreover, there is a clear understanding that progressive social and economic development of the countries in the Caspian Basin eventually can transform the relation of great powers to the Caspian region which mainly is considered by them in the context of production and transportation of energy resources. It is quite obvious that the first step on the way to reduction of external intervention in the processes of political and economic development of the region is initiation of new joint projects which could create the favorable internal background allowing to strengthen to some extent economic interaction between Caspian partners, as well as prepare some conditions for possible regional integration.

The modern Caspian geopolitical solitaire has been developing basing on the features of both regional and extra regional processes, the most relevant of which should include an aggravation on the Nagorno-Karabakh front, consequences of the Ukrainian crisis, start of the Chinese initiative on creation of the Silk Way Economic Belt, as well as the update format of interaction between Kazakhstan and Russia in connection with the beginning of the Eurasian economic union (EAEU). A new model of regional cooperation in Eurasia which became objective reality on January 1, 2015 aims at processes of economic cooperation in the Eurasian space on qualitatively new level. In spite of the fact that in view of considerable deterioration of economic indicators among the member countries of the Union, the expected results of the EAEU activity in respect of stimulate growth of mutual trade remain unachieved so far, the fact of the institutionalized integration structure availability clearly demonstrates a need of studying of its influence on other regional educations.

Accordingly, the purpose of the conducted research is consideration of the Eurasian integration and its influence on further development of the Caspian region with the subsequent identification of both potential positive and negative impact on forming of intraregional communications between the countries of "the Caspian five". Achievement of the designated purpose assumes successful implementation of a number of tasks which include consideration of the key factors determining forward development of a trend on expansion of a framework of cooperation between the countries of "the Caspian five", identification of the priority directions of interaction in Caspian region in a five-sided format with the subsequent comparison to the projects which are available within the EAEU, determination of intensity of commodity and economic interaction between the coastal countries with the subsequent determination of the region’s trade capacity.

It should be noted that such domestic and foreign researchers as Aliyev A., Shaymergenov T., Butayev A., Guseynov V.A., Zhiznin S., Zhiltsov S., Zonn I., Kushkumbayev S., Magomedov A., Mamedov R., Nursha A., Ushkov A., Chufrin G., Ezhiyev I., and the others have attempted to consider the Caspian region in complex. Problems and prospects of the Caspian region’s development in the context of formation of its geopolitical importance, a growth of an energy potential and security represent a great interest for foreign authors as well, among them it is possible to distinguish such researchers as Akiner S., Binnendijk G., Brendon S., Sangtixiu H., Hushang A., and the others.

The Caspian perspective is currently quiet widely provided in works of both domestic and foreign researchers, however, the designated authors more concentrate on country (influence of local, regional and global players in the Caspian developments) and sectoral (prospects of development of power, transport and logistics, trade relations, etc.) cuts in their researches.

Examination of questions relating to integration interaction in the Caspian region is rather new direction in the academic researches. The separate works devoted to this issue were prepared by such researchers as Landa K., Mitrofanova O., Mikheyev S., Poletayev E., and the others. Thus, it should be noted that owing to its novelty, an influence of the EAEU factor on the Caspian region has received insufficient studying. Noting the fact that currently the whole layer of the works is being created, which is devoted to questions of formation and development of the Eurasian integration, and its authors are such researchers as Vinokurov E., Kazantsev A., Kuznetsova E., Rakhmatullina G., and the others. Owing to various circumstances, an influence of the Eurasian integration on the regional processes in the Caspian Sea in most cases remains beyond the scope of the conducted researches.

Thus, an examination of the questions connected with the Caspian integration process and also with its possible correlation with the Eurasian integration represents rather new and insufficiently studied segment requiring close examination.

Methods

It should be noted that in the preparation of the work papers on identification of the integration process features specific to different regions, researchers mainly adhere to logic of the neofunctionalism concept, without allowing thereby possibility for absence of prerequisites for the subsequent integration. Similar approach certainly is a win-win solution in case of the Caspian perspective as well.

Methodological basis of the work are the conventional methods of the scientific analysis, such as synthesis, generalization, analogy. The system and structural approach, the factorial and functional analysis were widely applied in the research of the delivered problem. Application of these approaches in their combination allowed all possible forms and formats of cooperation between the countries of the EAEU and the countries of "the Caspian five" in such spheres as power, economy and transport, and also prospects for expansion of economic cooperation in the Caspian Basin within the current trade and economic situation.

Political prerequisites for development of regional cooperation in the Caspian region

The countries of "the Caspian five" are currently on the beginning of a journey of forming their own unique format of regional cooperation. It is necessary to recognize what exactly negotiations on determination of legal status of the Caspian reservoir are a reference point for the Caspian dialogue in its modern form. It is known that the question on the international legal status of the Caspian Sea which was earlier determined by the Soviet-Iranian arrangements, namely, the Treaty between RSFSR and Persia of 1921 and the Treaty of Commerce and Navigation between the USSR and Iran of 1940, arose after cancellation of the Treaty Establishing the USSR that automatically broadened a number of the Caspian states. It should be noted that at an initial stage the problem of the Caspian Sea status determination was considered mainly from the juridical party as newly formed states were not participants of former arrangements that, on the one hand, exempted them from any historical liabilities, and, on the other hand, provided wider field for geopolitical maneuvering [1]. Though, lack of the "constraining" factors has led to repeatedly changing conceptual approaches by the countries of the region. Now the coastal countries were convinced that the best option of differentiation of the Caspian Sea should be created on the combined basis that substantially will facilitate both process, and implementation of the corresponding terminology.

It should be noted that the consultations held by the countries of "the Caspian five" were filled with new content in the course of time and gradually were transformed from negotiations only on legal aspects of the legal status to multidimensional discussion on the whole complex of problems connected with the organization of interstate dialogue on the Caspian Sea. The short periodization of negotiation process concerning resolving the question of a new legal regime of the Caspian Sea (tab. 1), clearly demonstrates that active work on reformatting of the Caspian dialogue began in 2003 involving of the heads of the Caspian states into discussion of the Caspian perspective within five-sided meetings. Thus, after carrying out the III Caspian Summit on November 18, 2010 in Baku the process of forming the five-sided legal and contractual framework concerning legal regime on the Caspian Sea becomes more active. On its results the Agreement on cooperation in the sphere of safety on the Caspian Sea which regulates combat against terrorism, organized crime, arms trafficking, drugs and nuclear technologies, occupation of courts, illegal migration, illegal production of bio resources, etc. was signed. It is possible to call this Agreement the breakthrough in negotiation process. After it the whole series of documents (Protocols and independent Agreements) which formed the basis of so-called "new" standard contractual basis of legal regime on the Caspian Sea (tab. 2) was prepared and signed.

Thus, it can be said with confidence that for the considered period in negotiation process on the Caspian perspective there was a change of priority subjects for discussion. If before the party proceeded from confidence in primacy of legal issues of the status of the Caspian Sea, now there is the return situation, namely, the most productive discussion develops concerning the questions which directly are not connected with legal aspects and therefore possess the smallest conflictual potential.

Integrational potential of the Caspian region

The initiatives delivered and realized during the last Caspian Summit which took place in September, 2014 in Astrakhan can serve as eloquent testimony to emergence of the designated trend. So, for example, the initiative of holding the Caspian business forums which first meeting took place within the IV Caspian Summit is of a particular importance. Creation of constantly operating platform of business initiatives support for entrepreneurs of the countries of the Caspian region will promote growth of five-sided economic interaction that will allow the creation of acceptable conditions necessary for transition to a higher level of cooperation in a regional format.

In addition, it is about an initiative of G. Ber- dimukhamedov, the President of Turkmenistan, to develop the draft agreement on cooperation in the field of transport on the Caspian Sea within which creation of the Regional transport and logistic center, and also the proposal of V. Putin, the President of Russia, to start forming a railway circle round the Caspian Sea will become possible. As it is known, the countries of "the Caspian five" are direct participants of the Russian project on creation of the International transport corridor "North-South". Thus the main transportation of goods passes along a route through the Caspian Sea.

One of alternative options for growing economic interrelations between the states of the region is an implementation of the President of Kazakhstan N. Nazarbayev’s proposal to create the Caspian free trade area. It should be noted that there is already a positive experiment on creation of the special economic zones (SEZ) in the region. So, for example, SEZ "Seaport Aktau" with 5 projects which have provided production on the amount of 220 billion tenges fully operates on the Caspian Sea in Kazakhstan, and during 2015 together with the Azerbaijani party they plan to start implementation of the next project – the logistic terminal. In Iran the special economic zone of "Bendery-Enzeli" operates successfully. Azerbaijan considers possibility of placing SEZ in the Alyat settlement where the construction of additional capacities of the Baku port is conducted, creation of free economic zone in Astrakhan was also declared by Russia. In the long term the Caspian states have an opportunity to unite the created SEZ into a single regional system which would "surround" the Caspian Sea, and further to pass to a format of the free trade area (FTA).

However, it should be noted that whatever further steps of "the Caspian five" there were on the growing economic cooperation, the Caspian countries have to fully consider possible consequences of geopolitical and geo economic transformations around the region involving, first of all, formation of such new regional structure as EAEU.

EAEU factor

As direct participants in the process of the Eurasian integration formation, as well as developments of interstate relations in a format of "the Caspian five", Kazakhstan and Russia actually act as "bridge" between the designated forms of regional cooperation. On the one hand, working in well harmonious tandem, Astana and Moscow can provide mutual involvement and mutual participation of the Caspian states in different projects realized within the Eurasian integration. On the other hand, it is obvious that the coastal states outside the EAEU at least shall have opportunity to be timely informed on key transformations in the trade and economic sphere at their partners in the region, and as at most, to have opportunity to make a certain impact on various strategically significant decisions.

The decision of the EAEU countries to form the total energy market by 2025 can be a bright example in this context. Intention to coordinate energy policy and to create the total energy markets which include the markets of the electric power, of gas, oil and oil products arose at the Union countries first of all because of availability of close interaction in the spheres of pro

duction, transportation and conversion of fuel and energy minerals [2]. It should be noted that the EAEU members have considerable inventories of primary energy resources, exporting them on the international markets. Its share has more than 18% of natural gas world reserves untr ies^r o f the⁷reg io n^s provide^o ab o ut^eo ne _urthe_{g as production .} orld reserves and more than 14% of its production (fig. 1) At the same

time, it should be noted that the energy potential of the Caspian region is even more considerable. By the British Petroleum estimates, total oil and gas world reserves of "the Caspian five" constitute more than 17% and 46% respectively. Thus the countries of the region provide about ifth wo rld ^roil ⁱe xtraction ^aand ^hth eⁿ o ne ^rth gas production.

In these circumstances the decision to start the dⁿelo^esee^ct ^rcu msr^ancess fo^e to ^ec e^{s on}y r_mtotal energ y_e market_unwithin_dlth e_ilE A _tendments in nature_e of the_aenergy _t relati llrgco ncern sa form ats of n the . Kaza kh sta n gion .cIncparticular,t it f ishpossiblesto -expe here ^rof^tjoin tⁿ dev elopme nt ^ao f^gthe^. C aspi rks^lbo th o n^o theC aspian^csh elfⁿ and in^o th e^{f coop}The^ioPr otoco l ^pto^rth e Agr eement on ^t of the Caspian fields and carrying out prospect- in^o wor^es b^asp o^a the ^eaas^oian s^ee^pu a^pose t^oe subsurface_cuse of 1998 signed in Octobe ssia_hm ay _tcurrently serve as_na _o p ositive_n s otocol liq u idates sometpoin tsro f a rrangem three cross -border ofields , namely, oilfiel mp any^e "Lukoil"^tw ill^sbe^sable^eto^sprolong⁸ t e^sistructure of the northern^hC aspian ^o S ea^a i ssian^alegislation^ao nly companies^r w ith ^as posit_{d t d}gnal_l for _fft_h acti _{fi ld} velopment. The Protocol liqu^pates some points ^.f arrangements ^sf r^{expe c}o^e t ^, eve^eop^{s gne} n on ^{o cu men} ditional_r ge ologic al _aexploration of the_re oduction_. sharing agreem ent with _"Kazakh

will be able to prolong the license for geologi- s_aar_xpl e_ateve _oo pm en_uo_ureu _ou re_e ases_{ern Ca}undoubte dly_piw ill _tintrod uce_t some_{ing t}s on the_sCaspian_aSea. First of_aall,_s it _ith sussianrtrelations iinethea C aspian Sea ed t intensificationreo f ecooperation in the

field s^xand^eca rryingⁿou t ^oprospe cting^ves _{aspian trench.}rying out additional geological fferentiatio n of a^C bottom ^fiof nort hern ^lu- sion of the production sharing agreement with ^{p e}k ^eta^a. ^oesi^oes, l^{e sove}g ^{e g}l als^g a^sow 2015 _iby th e_hheads of_eK azakhstan_na nd _Ka- nal_hfor interaction d ev elopm ent. _oTh e_ud- nts of ratherp joint de velopmen ttin one the structure "C entral". Now the sR us sian ral e^elicense for^h g eolo^egical exp loration o f^en- spite^e of the^f fact that ^oa ccording^d to ^P the^uc- teⁿp articipa tion ^ehighe r ⁱthan^e 50%^eare^ent of the Russian Federation.

In addition to already carried out works on _tre so_aves _n an_el s sue _go_vecarry_t ng _tou _Re- entral _of field_kuntil _iconclus ion_rt of_e the_rch an._j Beside s,_llicensing_rwill also allow_ed- bsoil stu ntinue us

ding in the near future. A current one, 2015, shall become decisive in the course consortium among the oil companies for implementation of the large-scale “Eurasia” project. Presented in 2013, the “Eurasia” project assumes carrying out geological and prospecting works in Caspian Trench on search of hydrocarbons on a depth in 14000-15000 m. It is supposed that the consortium will be created on the principles of public-private partnership and will include 5-6 oilextracting companies. According to optimistic forecasts, the project will begin in 2016, thus a stage of geological studying of Caspian Trench to be extended up to 2021. The Kazakhstan authorities already announced that in upcoming in 2015-2016 the Codex "About subsoil" the special provision will stipulate conditions of decrease in the tax load in case of the works on geological studying, exploration of subsoil, and performance of the contract on geological studying of Caspian Trench that shall stimulate not only inflow of foreign investments, but also advanced technologies.

As investigation allegedly will be conducted in the Caspian Sea and in the territories which are in jurisdiction of as Kazakhstan, so Russia, now within the created council for “Eurasia” project there is a discussion with the Russian partners about coordination of the program on collateral actions. Within the works on studying of the deep-lying horizons and estimates of resource base of Caspian Trench it is planned to carry out a superdeep the Caspian-1 well. By a provisional estimate, drilling of a well will begin in 3-3,5 years after signing the contract and beginning of the works on geological studying with a total cost of the project in $500 million [3].

Speaking about possible transformations in the interstate relations in the region beyond the format of Kazakhstan-Russian partnership it is necessary to pay special attention to possibility of creation of FTA between Iran and the countries of the EAEU. In particular, the initiative about creation of the free trade area was stated by the Iranian party which hopes to initiate formal consultations with the Eurasian Economic Commission (EEC) about preparation of necessary documents for creation of FTA by an example of Vietnam. It is remarkable that Armenia which addressed to the Eurasian economic commission with the offer to begin negotiation process acted as a chief "lobbyist" of Iran’s candidacy as the applicant for the conclusion of the contract on the free trade area with the EAEU. In spite of the fact that Russia is the main trading partner of IRI in the Caspian region, big geo economic benefits from creation of FTA will be received by Armenia which, in view of transit and energy blockade from Azerbaijan, will purchase real opportunity to intensify trade with the union countries, and Russia in particular, through the territory of Iran.

EEC has currently made a decision to create a joint research group on an exit to the agreement on the free trade area in the Eurasian economic union with Iran. However, unlike Vietnam, IRI is still under the international economic sanctions imposed as in multilateral, so unilateral order which process of step-by-step removal will begin not earlier than in 2016. In addition, the Islamic Republic of Iran is not the full-fledged member of the World Trade Organization, standards and regulations of which were taken into account in case of development of the advising provisions of activities of the EAEU that assumes development of a special format of the possible agreement on FTA. In these circumstances even with a political will of the states to acceleration of creation process on the designated free trade area, a necessity to work out a set of details of technical nature, undoubtedly, substantially will complicate development of the agreement and extend terms of its signing.

Potential of trade cooperation in the Caspian region Speaking about possibility of FTA forming in the Caspian region, it is necessary to have a clear idea regarding amounts of a goods turnover of the countries of "the Caspian five" that will allow elimination of some disputed issues

urnover _gw t_onoran _feue_bto_tysom e_isg eopo_t ex ample,_tiin _. 20 14_oa g oods_ttu rnov er _rbetw $986 million, iw hile a goods turnovern of commo n regio nal cutr ofta mut ual ttrade t to^e3%ⁱand 5% . Th ough only^cfew ye^,a rs^r and^m $3,5 ⁱbillion respectively. ^eA t the ^es between^ath eⁿC asp ian countries^y(fig.⁶ 2 )ⁱh 63% ) b^le a lar e mar^o in th e^Ru are followe was $^, , ^y82 bill^gon. In ^g comm^yn regional cut of a ^{) an}ual ^ran-e ^{ur men}e^{s an}t⁽on ^, indic^o-

ca_s an_resgeo_d ec ono m_d c _%actors._{h o}o,_y or n_eKazakhstan and Iran co nstitu ted _bonly ussia3 an dlIran rwasc$1,l68 2 billion. In a, abovementionedu in dicators correspond- o^ath is indica tors ²w ere^e about^a$2^a billion ⁽e ²time , ⁱmain^r figure s^yo n ^amutual^gitrade e^rR ussia-K azakhstan ($21ⁱ05 billion or^- b^on R u ssia A zerbaijan ($4^e008^abillion or^- li^yn or 11%). ^,

Certainly, the above mentioned indicators can undergo essential changes. So, for example, due totserious tconsequences of sanctions pressure upon IRI _eeconomy the share _sof_c Iran’s presence in _tthe region since _I2012_s has_r steadily decreased, whereas the_h Ru ssian presence in the _i Caspian Sea region, on the contrary, steadily grows. According to the statement of the Iranian party, the country has develo ped the program ^g on increase in a goods turnover with the Caspian countries to $10 billion at the same time, the maximum amount of a goods turnover with the Caspian Sea countries has reached $6,2 billion [4].

Speaking directly about Kazakhstan, it is necessary to take into consideration the fact that today the countries of the Caspian region, except Russia, which accounts for the main part of Kazakhstan´s export and import in the region, slightly influence a trade policy of the country [5]. Despite the objective decrease in trade indicators caused by sharp reduction of prices for

QUARTERLY ANALYTICAL REVIEW 3 (63)/2016

energy which in turn led to strengthening of the crisis phenomena in economies of two states, thetsteadyavectord ong dominationainc a general goods_s turnover_ctbetween _eRussia-Kazakhstan will remain in theregion. _{012 has steadily} the Caspian Sea region, on the contrary,

Conclusion

t of the Iranian party, the country has ^odIt should be recognized that the coastal states have not reached the level of the interstate relations development necessary for creation of complete international economic cooperation in the region yet. Nevertheless, despite this fact, there are some signs for the environment acceptable for weakening of mutual claims in the political sphere which act as an obstacle in a way to achievement of higher level in economic partnership.

In general it is possible to note that the EAEU influence interaction between the countries of "the Caspian five" in medium-term prospect will have a dot nature. Thus the steady trend on

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economic rapprochement among Kazakhstan and Russia will be indirectly shown in the political sphere as well. Concerning the Caspian region, it is about mutual support in regulation of the reservoir’s legal status determination, and initiation of new forms for intraregional interaction which could increase the level of interstate cooperation in the spheres with a smaller conflictual potential than the questions of the Caspian Sea delimitation.

At the same time, as a part of the EAEU member countries, and the countries of "the Caspian five", Russia and Kazakhstan bear a certain responsibility for a due level of intensity in interaction between these two groups. Thus, it is quite obvious that Russian-Kazakhstan economic activity in such spheres as power, transport and trade act as a driving force both for Eurasian and for potential Caspian integration. Thus, there is an urgent need to prevent further weakening of economic interaction between the partners, especially, during the period of the crisis phenomena in economies of the countries in the region.

REFERENCES:

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2. Energetika. Evraziiskaya ekonomicheskaya komissiya. М. 2015. p. 4-5.
3. Glubina Evrazii// KAZENERGY. – 2015. – № 2 (69). – p. 24-26.
4. Kusainov A. Vzaimnaya torgovlya stran Kaspiiskogo basseina. URL:http://www.almagest.kz. – 2015 (available: 10.06.2016)
5. Poletayev E. Novye gorizonty rossiiko-kazakhstanskogo prikaspiiskogo sotrudnichestva v svete evraziiskoi intergatsii. URL: http://wef.kz. – 2014, July,8 (available: 13.06.2016)