On Eurasian Integration: Geoeconomics and/or Geopolitics

The transformation of the system of international relations has resulted into formation of the multipolar world. This new world order is being built on the background of the competition between the developed and the developing economies. These two compete for the space of various nature, namely political space (territorial conflicts), economic space (changing

the frontiers of economic integration units) and ideological space (market individualistic ideology vs more communal one). Resources and markets are still the objects of this competition.

Eurasian continent is currently at the center of these global trends. The economic space of the Eurasian integration, namely the Eurasian Economic Union (EEU) is increasingly involved into the global competition. In this situation, being a new player on the global market place, the EEU faces the task to consolidate its economic status of a significant actor of globalization while pursing a threefold end: firstly, to ensure that its participation in the global governance is on equal terms; secondly, to develop the regional market; and thirdly, to prevent the EEU member states from being dragged into geopolitical conflicts elsewhere.

The EEU also faces a number of challenges. High degree of interdependence of the economies of different types in the contemporary world means that any changes in this established system may disturb the economic and political balance of power. The most plausible factor that may cause such an imbalance is the contradictions between geopolitics and geoeconomics. In other words, these are tensions between the developed world, its scale and influence, and the

rapid enhancement of the emerging economies.

Economics and Politics in Global Context

The key concepts of space and borders, interests and institutions, security and development are crucial elements of analysis when one is to understand how economics and politics impact each other in the context of globalization. The current contradictory nature of the relations between geopolitics and geoeconomics may be explained taking into account the following factors:

– firstly, the countries that differ in terms of their economic and political competitive capacities operate with these two concepts differently in their economic and political discourses. Hence, we witness misunderstandings and tensions between these two types of states;

– secondly, the economic spaces of integration are growing in terms of their significance because they are not seen as the territories of individual states any longer but as the common markets of the certain states and, therefore, the main objects of competition on the international arena.

The next thing one shall bear is mind it that space and boundaries are conceptualized differently by political scientists and economists. Political space is the territory with the borders over which a state retains its sovereignty. Economic space often transcends the state borders. The borders as such, however, may be beneficial as their existence may bring certain advantages for the states while they are trading with each other. Political space, by its nature, requires continuity, inviolability of the borders and maintenance of the barriers. Economic space, on the other hand, depends entirely on the changes in demand and supply on the global markets.

The institutions and interests that are political and economic also differ. Political interests lie in the maintenance of a particular kind of social relations within the state borders and with the other states. Economic interests are exclusively related to creation, distribution, consumption of goods and services. The developed states - having established a number of institutions of global governance, namely the World Bank, G7, IMF, WTO - are trying to retain the control over the changes in both socio-political and economic relations. Yet, capital and goods move freely within the economic space being impacted by the laws of economic that has nothing to do with whith such thing as state borders or a particular type of government. This is where the reasons for apparent contradictions lie between the interests of the existing global market, regulated by the institutions established by the developed states, and the interests of the emerging market.

Apart from that, political scientists and economists understand security and development differently. In order to maintain political control over the territory for the sake of national security (preservation of the internal order of a certain kind) as well as for the sake of international security (preservation of the territory and people of a state and its defense against external threats), governments are very much protective of all sorts of barriers. Global economic competition, on the other hand, pushes governments to open up their countries in order to realize the competitive advantages it may have and to make it more attractive for foreign investment.

Thus, globalization makes states more dependent on external factors. Interdependence of states in the context of globalization gradually transforms the nature and functions of state borders and shifts economic contours. As the result, new protective mechanisms are being established that are more of economic nature rather than political one while the space of international economic cooperation expands.

These new socio-political and economic characteristics of inter-state relations in the globalized world are studied by the two disciplines, namely gepolitics and geoeconomics. The theory of geopolitics consider states as potential threats and therefore focuses on the issues of national security whereas the geoeconomics sees states as potential economic partners and deals with the issues of national development.

Geopolitics and Geoeconomics on Integration

Traditional geopolitics studies the patterns of distribution and redistribution of the spheres of political influence among states or alliances

of states (centers of power) within the global socio-political space. Geoeconomics emerged at the turn of the 19ths and 20th centuries as a new trend of geopolitics and was seen as a nonconventional school within the latter. Geoeconomics then was particularly attentive to the apparent shift from military-political to economic methods of power execution on the international arena that meant using predominately economic expansion rather than annexation of a territory and, therefore, emergence of new type of geoeconomic conflicts and their escalation.

Geoeconomics, these days, is an independent discipline that studies how the productive relations of economic actors are being shaped under the condition of the globalised market and its economic mechanisms to influence these relations. Geopolitics has been increasingly influential given that the military argumentation seem to regain its popularity as the major instrument of geopolitics and when the UN is seen as having lost or lacking any means to resolve international economic and political conflicts.

The opposition of geoeconomics and geopolitics is still there due to the several factors:

• formation of the multi-polar world system is incomplete;
• UN does not have any efficient institution alized capacities to manage the economy on the global scale;
• geoeconomics’ status as an independent discipline is still guestionable for being capable to provide theoretical foundations and explanation how certain mechanisms of geoeconomic character govern the course of the inter-state interactions or conflicts on the world market.

At the current stage of globalization, the major conflict is rooted in the difference of geopolitical and geoeconomic interests and in understandings of integration held by the most significant powers and alliances belonging to the developed and the developing worlds respectively.

The current state of the world development is characterized by simultaneous impacts of new geoeconomic trends from one hand and new geopolitical challenges from the other. The most significant geoeconomic trends are:

• division of the world economic space into the Western (Euro-Atlantic) world that is currently in a state of post-crisis uncertainty and rapidly developing Eastern world that is constantly gaining its importance within the world economy;
• shift in economic activity and world trade from the developed world to the developing one. For example, during 2000-2012, the share of the developed countries in the world GDP decreased by 16.6% and in the world trade, it dropped by 14.7%. The share of the G7 went down by 17.6% and 13.8% respectively. For the same period, the developing and transition economies increased their stake in the world GDP by 14.1% and their share in the world trade grew by 14.7%;
• regional issues dominate over the domestic ones and the influence of the regional alliances of the developing countries, namely BRICS, SCO, EEU, ASEAN and others, is constantly increasing. Within these alliances, the main economic challenges caused by globalization are addressed according to the principle of collective leadership;
• competition for raw material resources is intensifying and, therefore, the importance of the regions, where those resources are located, is growing;
• human resources and demographic factors are more significant than ever as they alter the quality and structure of the global labor market and consumption.

The contemporary geopolitical challenges are the following:

• competition between the East and the West for the “right” to decide on the model of further global development;
• imbalance of the capacities of economic and non-economic elements to impact the developed and the developing economies;
• actors of economic globalization (including those in the developing world) change in terms of their number and range while the criteria of global influence remain the same still meaning the military-political potential;
• competition for the “right” to shape discourses and perceptions and to construct the values . Enormous numerical advantage of the developing world of 80.7% of global population means that the ideology remains an important factor of influence and challenges the

emerging models of international development. For example, the population of the SCO member states is twice bigger than the population of the G7 countries combined. As for the BRICS, these countries exceed the G7 four times in terms of their population. According to a number of American experts, over the next fifteen to twenty years, more and more countries with the developing economies may be gravitated to the Beijing model rather than the Western model of the market economy [1].

As the developed countries still strive to retain their global political influence, while their economic status makes it more and more challenging, they are more likely to chose to intervene in the following spheres:

• into the economies of those states whose location is advantageous in terms of geopolitical considerations and where the bulk of the raw materials are by the means of the sanctions of political, military or economic nature;
• into the regional and interregional relations via launching the alternative integration projects that would include the emerging economies, such as the New Silk Road for the countries of Central Asia and the Eastern Partnership for Georgia, Moldova, Ukraine.

As the geopolitical challenges intensify the major Western powers (the USA in particular) are increasingly likely to employ non-economic, predominately military, means of influence due to the following factors:

• Euro-Atlantic alliance is still controlling the main global institutions (the World Bank, IMF, WTO, UN to a certain extent);
• western countries still have large shares in the economies of the developing countries, particularly in terms of the foreign trade and the energy sector. For example, the EU accounted for 52.9 % of the turnover and 57.9 % of the total exports of the ECU/EES of Belarus, Kazakhstan and Russia. As for the G7, the figures are 30,5% and 28 %, respectively;
• the developed countries still have very uneven levels of investment consumption and savings as well as of their shares in the world GDP and in the world sovereign debt;
• – military means of global influence still

prevail over the economic mechanisms. The US spends on its defense more than China, Russia, Japan, India and all the other NATO countries combined. Thus, the US has a $700 billion share in the NATO annual budget of more one trillion [2].

EEU in Geoeconomic Space

The EEU has been established on the background of the intensified geopolitical rivalry for defining the further directions in international relations and the geoeconomic rivalry on the world market. The gravity in this new multipolar world system is distributed between the developed and the developing worlds (the United States and Germany vs China and Russia), these are the gravitation centers creating new integration economic spaces around themselves, which are the main objects of the global competition as well as new integration unions that are becoming the main actors of globalization.

The competition is between these main actors of globalization, namely the EU, NATO, NAFTA, G7 etc. representing the developed world and the EEU, SCO, BRICS, ASEAN, G20 of the developing world. They compete for the economic space in order to expand their influence and to ensure their access to the mineral, infrastructural and human resources.

The tension increases along the following lines:

• between the institutions of globalization; the G7, WB, IMF, WTO on the one hand and those of the G20 on the other;
• between the actors of globalization; the EU, NATO, NAFTA on the one hand and the SCO, BRIKS, EEU on the other;
• between the technological power of the developed world and the natural resources in the developing world;
• between the scale of developed economies (their GDP) and the economic growth in the developing countries as well as the sales volume in the developed world and the growing trade flows in the developing countries^[2];
• between the financial capacity of the developed world and the rapidly growing financial markets in the developing world^[3];
• between the quality of human capital and potential of human development of the developed and developing countries given that the population of the latter is 5.5 times bigger than in the developed countries.

Since Eurasia is not immune from the global trends and conflicts discussed above and given that the Eurasian market is an object of the global competition, it is crucial for the EEU to elaborate a comprehensive vision of the economic integration in order to sustain and secure its development. This vision should take into account both the geopolitical and geoeconomic consequences of the expanding boundaries of global economic cooperation.

It should be noted that whether the EEU is to enhance and preserve its economic significance depends on the following:

• dynamics of its economic growth should be maintained further via a number of programs aimed at enhancing of the economic structure, namely the programs of industrialization, modernization and technological breakthrough;
• availability of the resources should be preserved. This is particularly relevant not only with the regard to the mineral, especially renewable resources, but also the infrastructure and human resources;
• already existing cultural and humanitarian ties should be strengthened further especially within the former Soviet Union and throughout the developing world;
• economic influence on the CIS, which should be maintained and deepened via economic integration and cooperation within the CIS Free Trade Zone and the Eurasian Economic Union, should expand.

Secondly, the success of the EEU is dependent on better use of the mechanisms of economic influence when the EEU member states interact within other integration structures, namely the CIS, its Free Trade Area, SCO, BRICS and APEC as well as the Cooperation Council of Turkic Speaking States, Organization of Islamic Cooperation, Economic Cooperation Organization.

The third thing to do is to use the informal mechanisms within the G20; further cooperation with Islamic World, namely Turkey, Saudi Arabia, Indonesia should be considered as a possible direction to consolidate the emerging economies.

The fourth thing the future of the EEU is dependent on is whether the new formats of cooperation with partner countries will be found within the existing international alliances. This refers to the space of the economic partnership that is being formed and that would include the EEU, SCO, BRICS. In our view, such an “Eurasian-Asian” format can successfully counterbalance the G7 in Eurasia. There are a number of the grounds for us to believe so:

• eleven countries (thereafter G11) the members of the EEU, SCO and BRICS are constantly improving in terms of their share in the global economy while the share of the G7 gradually going down. For example, there has been 12.4% increase of the share G11 in the global GDP while the share of the G7 reduced by 17,6%; the share of the G11 the world trade rose by 10.5% while the G7 demostrated 13,8% decrease; in terms of FDI inflows, the G11 performance improved by 15.5%, the G7 lost 30,6%; as for the global FDI outflows, the G11 showed 10% growth and there has been 1% reduction for the G7; finally, the G7 had 11.5% of the global population in 2000 and 10.7% in 2012 whereas for the G11, these figures were 44.6% in 2000 and 43.2% in 2012 [3];
• imports of the G7 and G11 of the major commodity groups has a similar structure; the G11 has greater demand for the raw materials and less demand for the manufactured goods than the G7 (in contrast to the EEU and the CIS). In 2012, the raw material amounted 19,1% and 20% in the import structure of the G7 and the G11 respectively and the figures for the manu factured goods were 63.9% and 60% [3]. This gives additional opportunity for the market of the raw materials;
• proportion of the raw material in the export structure of the EEU, SCO and BRICS is much bigger than in that of the G7. In 2012 the raw materials comprised 6,8% and 18% of the G7 and G11 exports respectively. Therefore, the G11 countries are more likely to maintain cooperation in the energy sector. [3];
• the share of the G11 in the EEU external trade (excluding the EEU member states) is rather high amounting to 15.7% with 12.1% of the export and 22% ) of the import.

Given the changes in the geoeconomic situation in Eurasia where the economic weight of the EU is decreasing while the political presence of the USA (NATO) is increasing and the Asian vector in USA policy in Eurasia is gaining its significance, the G11 as an economic space is strategically not less important for the EEU than the G7 and, in the number of cases, is even more preferable than the G7.

To sum up, as the formation of the multipolar world system of a particular kind has been incomplete, there is the competition between the economic and political interests of the actors of globalization for expansion of the boundaries of the spaces that are crucial for its future outline. This clash of the geopolitics and the geoeconomics is caused by the lack of any effective institutions of global governance as well as any geoeconomic mechanisms to regulate the interstate conflicts on the world market.

The EEU has to establish itself on the background of intensified geopolitical rivalry over

a future of the international relations and the geoeconomic competition for the world market. The developed and the developing states are currently the two poles of gravitation that form a number of economic integration spaces around them (these are the objects of the global competition) and create a number of integration unions (that are to be the main actors of globalization).

The subjects of globalization compete for the economic space, in particular, for the right to draw the borders and for the resources. The competition is steadily intensifying due to the following factors: contradictory relations between the institutions of globalization and the subjects of globalization; the scale of the developed economies and the rapidly growing developing economies; the financial power of the developed countries and the vigorously increasing financial markets of the developing countries;

the technological dominance of the developed world and the immense deposits of raw materials in the countries of the developing world; finally, the difference in the quality of human capital and the level of human development in the developed countries comparing to huge human resounes in the developing ones.

The establishment of the Eurasian Economic Union enhanced the global status of Eurasia as an economic space in terms of the future configuration of the multipolar world system with

the Euro-Atlantic and East Asia being the major power centers. The sustainability and security of the EEU at the present stage is dependent on having a comprehensive vision of its future development that would take into account the possible expansion of the economic borders of the Eurasian space. Therefore, it is of crucial importance for the EEU to consider the following:

• how to maintain the economic significance of the EEU in future;
• how to use better the mechanisms of economic influence within the existing formats of integration;
• how to use the informal mechanisms of global governance;
• how to use the new formats of cooperation, in particular the “Eurasian-Asian” framework, which would comprise the EEU, BRIKS and SCO, to win the economic competition in Eurasia against the G7 to maintain economic stability of the EEU.

SOURCES:

1. Мир после кризиса. Глобальные тенденции –2025: меняющийся мир. Доклад Национального разведывательного совета США – М.: Издательство «Европа», 2010 С.46.
2. Кудрин А., Фильгенгауэр П. Дискуссия о военных расходах // Вестник Европы .-2012.- № 34/ //http://magazines.russ.ru/vestnik/2012/34.
3. UNCTAD Handbook of Statistics 2013 // http://unctad.org.