5 challenges that will determine the future of the Eurasian Economic Union

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Today the Eurasian Economic Union is going through «growing pains», struggling to come out of the limits of the post-Soviet format of «free trade zones». Professor Dmitry Yevstafiev of the National Research University, Higher School of Economics (NRU, HSE) discusses the main “growing pains” and comes to the conclusion that the major challenges for the future of the EEU appear to be not the military-political conflicts, but the development of integration institutions and trans-governmental industrial enterprises.

5 challenges that will determine the future of the Eurasian Economic Union

Originally appeared at Eurasia.expert, translated by AlexD exclusively for SouthFront

It is assumed that the Eurasian Economic Union, which started to work in January 2015, finds itself today in a crisis. Often it is linked with the escalation of military-political conflicts in the last year and a half. However, despite the critical military-political situation in the Near and Middle East and the intensification of conflicts, linked with international terrorism, it is incorrect to say that it is specifically the military-political factors that are holding back the development of the EEU.

The crisis that the EEU is going through today is, without a doubt, “growing pains”. It is the normal consequence of the movement away from the post-Soviet format of “free-trade zones”, which in different formats and under different names existed for more than 20 years. The potential development of the EEU faces more difficulties because of significant reduction of internal investment potential in the Eurasian territory in the abrupt falls in prices in the global commodities markets.

The strategic problem in the development of the EEU and in the socio-economic integration processes in the New Eurasia, in a nutshell, is the mixed economic trends in the post-Soviet territory. After all, “New Eurasia”, a term very often used in political sciences and economics, in fact, describes that part of the post-Soviet territory that so far was not swallowed up by the major global economic forces. This post-Soviet territory preserves internal non-administrative drivers, motivators for the economic integration and the creation of new trans-regional economic ties.

On the one hand, the EEU gave a strong integration boost, which sooner or later will crystallise in the appearance of inter-territorial ties of a new kind, the importance of which will grow in the deepening of the economic crisis. On the other hand, the logic of the economic development of 2000s and 2010s based on the strength of high prices in the mineral raw materials made the integration processes in the post-Soviet nations less of a priority.

This created the effect of “distraction from integration”, drawing in nations of the post-Soviet territory in the economic processes of regional neighbours. Primarily into the China-centric economic system relations, but into the complex, and not always economically legal economic processes in the Middle East as well. The question of future Eurasian integration and the EEU as an integration tool depends on which of these opposing vectors will be satisfied most with an effective institutional base. In other words, from a long-term point of view, the main challenge is the institutionalization of the development of the EEU.

Moreover, the pursuit of key global forces in the development of strategic alliances, to achieve the strengthening of institutional bases of the EEU will be quite difficult. In any case, this will be opposed with tendencies that will develop around the EEU. It is difficult to tell if the political leaders of the EEU will be able to succeed in making the Union a successful working institution.

This becomes an important challenge for its development. The EEU will fully be able to come out of the «free-trade zone» frame only when the Union as an institution will promote the formation of important trans-national industrial enterprises that will be able to provide a significant influence on world market conditions in their own territories.

There are other important challenges in the development of the EEU. We will list them as follows:

Trust. It is obvious that the countries of the EEU have reached the limits of trust to a level of transparency within their policies. Opposition in the areas of “sanction” policies, of course, added additional mistrust, however this does not appear an important factor. The main problem appears to be the desire of all participants of the Eurasian integration, especially in Russia, to preserve the most “free hands”, in politics, as well as in economics.

In view of this, it must be taken into account that the extent of trust between partners depends on the willingness of each individual to take on the mid- and long-term responsibilities with each other. The development of trust between the members of the EEU in the whole of the New Eurasia are significantly complicated with independent policies with partial “legalization” of radicals (of a national-patriotic persuasion) and for using it for propaganda purposes directed towards their partners.

Unique information environment. What appears to be most important is the preservation of the New Eurasia as a territory not only with a unique format of mass communication but with a unique content structure, but mostly, with similar principles for its public circulation. To include independent countries or even independent regions of certain countries into the “information sphere” of neighbouring regions (what we already consider in certain regions of Central Asia) will cause a substantial impact in the process of institutionalization of the EEU and in the growth of its influence. In the modern world, we must be not only precise, but an information entity and a source of relevant global content. In this sense, the main priority must be to develop a unique information and knowledge base from EEU out of the periphery.

Logistics network. Objectively the post-Soviet territory finds itself in the priority sphere of logistics interests of adjacent economic systems. These economic systems would be interested in their reconfigurations on their terms with their operational and legal standards. If that happens, then we can talk about the internal network of the region only conditionally, especially if external forces manage to, even in part, impose a strategy of development of transport and logistics infrastructures on their own basic standards and goals. It is important, however, to understand that in the sphere of logistics the EEU has the possibility of steadily developing only as a logistically integrated space, working in the framework of common standards.

Bureaucracy. Regardless of the necessity of institutionalization, the EEU must avoid transforming itself into a bureaucratic structure, providing some “macro processes”, that society will perceive as an unnecessary burden. The sad experience of the European bureaucracy must be properly evaluated on the post-Soviet territory. Of course, institutionalization without a bureaucracy is not possible, however, especially true today, in this period of global economic crisis, the structures of the EEU must keep a high level of flexibility and competence to be able to react quickly to problems that may appear. The only recipe for this is the involvement of the civil society and experts from surrounding countries in the institutional processes.

So far this resource of institutionalization without unnecessary bureaucracy, like the civil society, in the EEU is clearly underestimated.

The problem of the current stage of development of the EEU and the size of New Eurasia in whole lies with the fact that in the political conditions of uncertainty and non-formation of an economic basis of the Eurasian integration, even from a strategically insignificant perspective, may have a long-term destabilizing effect. We, unfortunately, are not always qualified to evaluate long-term effects of small political “grievances” and strategic developments. In this sense, in a foreseeable future, the main challenge will likely be to minimize the quantity of strategic miscalculations, which might become long-term irritants.

Following this, the condition for the development of the potential of the EEU will be significantly more favourable.

Dmitry Yevstafiev, Professor, NRU, Higher School of Economics

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