_ Sergey Glazyev, adviser to the Russian President on Eurasian economic integration. Moscow, September 17, 2016. Interviewed by Rustem Falyakhov, Translated from Russian by Kristina Kharlova.
— Sergey, you took part in the St. Petersburg’s economic forum — what was most important?
– The most important is the confirmation of the course for the openness of the economy and Russia’s readiness for wide international cooperation, which the president voiced in several ways. The most interesting of them, and I think that’s the main theme, is the creation of a Greater Eurasian economic space.
— What’s new?
— There is Eurasian integration, our home integration in the post-Soviet space, and now wider integration was announced, a common space, which would encompass almost all countries of Eurasia.
Talks about it are not new, but for the first time at the top political level, it was announced as a serious geopolitical project. I believe that this is the most important political news.
— Let us then take a closer look at it. By 2025, it is desirable to create a single Eurasian energy market and a single financial market. Possible?
— These goals are included in our plans of creating single energy, financial, hydrocarbons markets. And this time frame is determined in order to move on to common markets in these areas, which are highly monopolized and difficult to integrate.
— Regarding the single financial market — are we talking about the single EEAU currency?
— No, the president did not talk about it. He underlined those goals, which were agreed on and which are now being implemented. As for the supranational currency, there are many talks about it, but so far there are no international agreements and specific plans in the framework of the Eurasian Economic Union. And I think that until we stabilize the ruble, we cannot talk about it. That is, in order to move towards some kind of monetary union, greater monetary integration, we must first to agree on stabilization of the exchange rate among our currencies.
This was the first thing the Europeans did, there was a “currency snake” – European states have committed themselves to maintain a stable exchange rate, in order not to cause shocks in mutual trade and the so-called “currency wars”, when the government devalues the currency in order to raise the competitiveness of their producers.
— You mean to stabilize within the Union the rate relative to the national currencies of the Eurasian countries? Or are we talking about the rate of the ruble against the major currencies, the dollar and the Euro?
— Well, at least internal. Because you see, otherwise there is a spontaneous oscillatory motion. When the ruble went down, it pulled all the other currencies of the members of the Union. Because otherwise there is a very strong distortion of trade. This state of instability is very bad for mutual trade, investment cooperation. So, before we talk about a monetary union, we must stabilize national currencies, at least relative to each other. But this subject was not discussed at the forum.
– But was there a hint?
— Indirectly, perhaps, this theme is present in conversations about joint investment projects, attraction of investments. As any investment project requires long-term forecasting, it requires a stable exchange rate…
— And then the transition to single currency?
— The single currency will be some other currency that will be created by another emission center, and what policy will this emission center choose, we do not know. For example, the European Central Bank prints euros backed by the debts of euro member states. When they switched to the single currency, monetary union, it became clear that different states have different options for pulling the emission resource. For example, Greece began a more active issue of state obligations than allowed by its economic condition. In the end, the Central Bank was forced to buy Greek debt, Greek bonds, to issue Euros, which was in favor of Greece. But Greece today was forced, so to speak, to return to a state of tight monetary discipline, and it got even worse.
The transition to a monetary union involves, firstly, the unification of the fiscal system; second, the unification of the debt policy, because the money printed is backed by debt.
State debt or corporate debt, one way or another, the foundation of money issue are debts, and the money today is backed only by debt if you take global currencies. Accordingly, if we hypothetically assume that we will have a new currency, respectively, it will be issued, if we follow the example of Europeans, under the state obligations of the members of the Eurasian Economic Union. But it is too early to talk about this, because our integration today is strictly defined by the establishment of common markets of goods, services, capital and labor. And this work on creation of common markets will be completed only by 2025. And only then we can speak about a new stage of integration, which may be accompanied by increased integration of functionality on issues of fiscal policy, tax and public debt.
— And do you have an idea, which countries could join the Eurasian Economic Union, which now includes five countries? In the long list previously mentioned there were almost 12 countries — from Israel to Peru… Is this fantasy?
— The President’s speech emphasized that the broad Eurasian integration, or Greater Eurasia, involves the concept of multi-speed integration, which we used in the framework of the CIS. Countries that were more focused on integration, created the Customs Union. At first, only three states: Russia, Belarus, Kazakhstan. Today there is also Armenia and Kyrgyzstan.
In parallel, we have a large number of economic agreements within the CIS, including the free trade area, which includes all the CIS States. And the same model is offered by our president for the greater Eurasian integration. Within this model, there are clusters of more cohesive countries, such as a single economic space, for example, of the Eurasian Economic Union.
— Such as the old Europe and Eastern Europe?
— There is the ASEAN zone [Association of Southeast Asian Nations], then there is ASEAN plus China. That is, in the East they also have their own integration systems. Free trade zone is the mildest variant of such an integration, when you only remove import duties. And this is what was agreed with Vietnam and there are negotiations with India.
— And how about China?
– With China’s there is emphasis on joint investment projects, which is why, in fact, China initiated the establishment of an international infrastructure investment bank. Within BRICS, too, there is emphasis on joint investment projects and on helping each other in macroeconomic stabilization, if needed.
This is a complex integration model, which takes into account the diversity of the states located in Eurasia, recognizes their unique interests, eliminates interference in the internal affairs of each other and is based on consensus. This is the difference of the approach of our president from the American model of integration, where everyone is forcibly driven into the same model.
– But European leaders see the risks in different speed of integration of new EU member countries.
— Why, they where integrated at once. You know, the European model is the imperial model. They force new EU members to live by the rules of the empire, that is, of Brussels.
And integration is total. You can not enter the European Union in part. You have to take on a lot of commitments and, plus, promise to comply with all the directives of the European Union. This is why today in Ukraine there is an economic disaster, even though they are not members of the European Union, they were offered some flaky form of association with the European Union. But even within this transitional quasi-integration Ukraine was deprived of the ability to conduct independent economic and trade policy. And EU member states — they lost sovereignty in the field of trade and economic relations, and monetary, too, if they belong to the Euro zone.
Therefore, the difficulties of European integration are just due to the fact that everyone is forced into a very rigid model with a large number of regulatory documents amassed over the years of EU existence, and new countries must follow all these rules, developed over decades, immediately, without exception.
Source: Fort Russ