Mapping The Potential EU-EAEU Cooperation Agenda

_ Evgeny Vinokurov, Director, Eurasian Development Bank (EDB) Centre for Integration Studies, PhD, Dr. hab.; Vladimir Pereboyev, Head of Projects at the Eurasian Development Bank (EDB) Centre for Integration Studies, PhD. IIASA. Working Paper. Laxenburg, 16 September 2016.

Relationship crisis

Despite the severe crisis in the EU-Russia relationship, we think that efforts invested in structuring and mapping a future EU-EAEU rapprochement would be time well spent.

There is an ongoing debate about the appropriateness of the official dialogue and deepening of cooperation between the European Union (EU) and the Eurasian Economic Union (EAEU). The current state of debate on the EU side is truly disappointing. As a matter of fact, EU experts are currently debating not how to structure dialogue with the EAEU, but rather whether such a dialogue should exist at all.

Here is a very short review of the recent views expressed by the EU authors. Mark Leonard and Ivan Krastev from the European Council on Foreign Relations express the view that “the best hope for the EU is to establish that working relations with Russia could be through the EU’s engagement with the EAEU” (Leonard, Krastev, 2014). Rilka Dragneva-Lewers and Kataryna Wolczuk from the University of Birmingham recommend focusing EU-EAEU relations only on trade, assuming that the EAEU is not really a credible partner (and competitor). Their position is that “engagement with the EAEU should move forward with due caution and include a number of conditions with regard to Russia’s actions in Ukraine as well as Russia’s WTO commitments. It is important that any dialogue includes, apart from Russia, the Eurasian Economic Commission and other EAEU member states, if only to prevent Russia from monopolising the EAEU’s external agenda and avoid the marginalisation of the eastern neighbours inside and outside the Eurasian bloc” (DragnevaLewers, Wolczuk, 2015). DGAP expert Stefan Meister points out the problem of politicizing of all relations between the EU and Russia. He believes that it would be more prudent to upgrade collaboration between the EU and the Eurasian Economic Union not through politicization, but based on pragmatic principles, in order to improve economic relations with the EAEU member states. The EU’s strengths, he writes, lie in its ability to negotiate technical standards and reduce barriers between the EU as an economic area and the EAEU, not in political haggling with Moscow that does not really serve EU interests (Meister, 2015). By contrast, Susan Stewart from the Stiftung Wissenschaft und Politik (German Institute for International and Security Affairs – SWP) asserts that the dialogue between the EU and the EAEU is a return to failed approaches, so there is no need for such a dialogue (Stewart, 2015). In a much more nuanced tone, another SWP expert, Alexander Libman, suggests that the EU-EAEU dialogue format has several advantages, but is not wholly adequate to overcome the fundamental contradictions between Russia and the EU (Libman, 2015).

Recently, IIASA has drafted an Interim Report on the long-term project “Challenges and Opportunities of Economic Integration within a Wider European and Eurasian Space” (IIASA, 2016, mimeo). It argues for taking a ‘long’ view toward the EU-EAEU rapprochement, for the need to structure a comprehensive cooperation framework and for not being discouraged by the apparent lack of short-term progress.

Our position is that the dialogue between the two integration blocs is of utmost long-term importance and could be structurally built on the ‘mega-deal’ approach (Vinokurov, 2014). The scope of potential issues that could be addressed by the mega-deal (whether it takes the form of a single agreement or set of agreements) encompasses dozens of items. We also suggest to look outside of the DCFTA ‘universe’ for a legal structure, e.g., to start off from the EU-Canada CETA structure.

Box 1. EU-EAEU mega-deal: an agenda at large

1. Trade in goods (abolition of import duties, with a clearly defined set of exemptions) 2. Elimination/streamlining of non-tariff trade barriers 3. Regulation of cross-border electronic trade 4. Trade in services 5. Liberalization of access to financial markets 6. Free capital movement 7. Regulatory convergence (norms and standards) 8. Intellectual property rules 9. Reciprocal recognition of diplomas (degrees), including professional education 10. Visa-free regime, with a complete set of readmission agreements as a prerequisite 11. Labour migration regime 12. Mobility of pensions 13. Special regime for Kaliningrad Region (investment or trade-and-investment) 14. Special neighbourhood regions 15. Large-scale educational exchanges (Erasmus Mundus, and so forth) 16. Application of the EU’s Third Energy Package to projects envisioning Russian gas exports 17. Development of international transport infrastructure (road and rail corridors) 18. Establishment of an EU-EAEU common electric power market 19. Regulation of partial reciprocal access to public procurement 20. Competition rules 21. Dispute resolution mechanisms.

Approximately 25 per cent of the domains mentioned in the Box 1 are relevant to the movement of people. In this IIASA Policy Brief, we briefly cover a few of the outstanding issues that fall under the heading of the movement of people, namely readmission agreements, a visa-free regime, labour migration, mobility of pensions, large-scale educational exchanges, and recognition of professional diplomas and certificates. Our goal at this stage is to simply map them, to provide some background information, and air some relevant policy ideas.

1. Migration: EU-EAEU visa-free regime as the ultimate policy goal

Proposal: Visa-free regime between the EU and the EAEU, including a set of agreements on readmission.

Article 8(1) of the Treaty on European Union states that “the Union shall develop a special relationship with neighbouring countries, aiming to establish an area of prosperity and good neighbourliness, founded on the values of the Union and characterised by close and peaceful relations based on cooperation”. “Migration and mobility is a key area of co-operation for the EU and its partners. Enhancing mobility, especially for education, scientific, cultural, training and professional purposes, has positive effects on economies and societies alike. Tackling people smuggling and illegal migration is a common challenge” (European Commission, 2015a).

After all the Russia-EU disputes are settled (just to reiterate, our proposals are long-term ones), passenger and migration flows between the EAEU member-states and the EU will continue to increase. Both sides should reinforce and develop their cooperation, which should take into account the lessons of the Common Space on Freedom, Security and Justice, elaborated by the EU and Russia back in 2003-04. (see Sagrera, Potemkina, 2013) Especially worthwhile would be perusing the drafts of the Readmission and Visa Facilitation Agreements (VFAs), which were prepared as a part of the prospective package.

An important caveat: visa issues actually lie outside of the supranational competence of the EAEU. Hence, technically, negotiations will have to be conducted with the individual EAEU member states, preferably in coordination between them.

For any serious negotiations on an EU-EAEU countries’ visa-free regime to succeed, a complete set of readmission agreements should be implemented.

The EAEU and the EU can benefit from introducing a visa-free regime that would have the usual limits (for example, 90 days in a year), because it will facilitate tourism and business exchange among member states.

There might be some modifications and restrictions to the idea of the visa-free regime. For example, such problematic (migration-wise) states as Kyrgyzstan might be excluded on the EAEU side at the initial stage (although we think that a readmission agreement might alleviate concern about the matter). Also, the initial scope of countries from the EU side could be restricted to the Schengen area.

Box 2. The CIS visa-free regime

Formally, there is a visa-free regime among the CIS countries (MFA of Russia). But some countries tighten up their visa regimes from time to time. In 2014 Ukraine introduced visa requirements for Russian citizens, for political reasons. Russia did the same, tightening rules on residence on its territory for foreigners from countries whose citizens have the right to visa-free entry to Russia (except the EAEU member states). These restrictions cover immigrants who come to Russia without a work permit. The purpose of this change was to create an instrument of legal limitations and regulation of labour migration from CIS countries. This was a reaction by the Russian authorities to socio-political problems arising from the uncontrolled influx of immigrants and the increase in anti-immigrant sentiment in Russian society (Chawrylo, 2014).

2. Labour migration regime: There are two common labour markets

Proposal: Due to the extreme sensitivity of the labour migration issue, it should be left off the EUEAEU agenda for the medium term.

Labour migration flows between the European Union countries and the EAEU are relatively intensive. According to official statistics (FMS of Russia), 221 thousand Germans and 104 thousand British citizens were residing in Russia in 2014.

The EU is certainly very attractive for labour migrants from the EAEU countries (this is actually a problem with regard to the visa-free regime). Russia is in the Top 10 countries of origin of nonEU nationals residing in the EU (565 thousand are from Russia) (Eurostat, 2015). Also the EU signed Mobility Partnership with Moldova, Georgia and Armenia that aims to manage the migration flows and fight illegal migration (Havlik, 2012).

Box 3. EAEU countries’ attitudes to migration

The multi-year “EDB Integration Barometer” provides interesting data about EAEU countries’ attitudes to migration (EDB Centre for Integration Studies, 2015b). 16% of Armenian citizens prefer labour migration to Germany, 15% to France (in 2014, the figures were 12% and 9%, respectively); in Belarus, Russia (here especially it is the 18-44 year-old population with higher education) and Kazakhstan, potential labour migration Germany is a priority for 15%, 13% and 10% of citizens, respectively. When choosing a country of potential permanent residence, citizens of two EAEU member states, Russia and Belarus, prefer the EU states. One out of 10 Russians is ready to spend his life in the EU. For example, 5% prefer Germany among the EU states (10% in 2014). Among 18-25-year-old Russians, 9% prefer Germany, 7% France, and 7% Great Britain. In Belarus 9% of citizens prefer Germany, 7% Great Britain (among 18-25-year-old citizens, 16% would prefer to reside in Germany, 16% in Great Britain, 11% in France). In Armenia 11% of citizens prefer France and 9% Germany. We note that more than 50% do not want to leave their native country.

It is common knowledge that the EU possesses a well-developed common labour market which comprises 28 states with a total population of 508 million. By contrast, it is still almost unknown that the Eurasian Economic Union also represents a common labour market, effectively uniting five states and ca. 180 million people.

In the 2000sthere was a rapid rise of labour migration within and outside post-Soviet space. Within a decade, labour migration became a highly visible phenomenon with significant economic and social consequences. Russia and Kazakhstan are natural centres of attraction for migrant workers in the CIS region, which boasts the highest migration levels in Eurasia. According to official statistics of the Russian Federal Migration Service, as of 2014, 2.1 million migrants from Uzbekistan resided in Russia, 2.5 million migrants from Ukraine, about 1 million migrants from Tajikistan, 0.7 million migrants from Kazakhstan, 0.55 million migrants from Belarus, 0.5 million migrants from Azerbaijan, 0.55 million from Moldova, 0.5 million from Armenia and 0.5 million migrants from Kyrgyzstan (EDB Centre for Integration Studies, 2015a). Unofficial assessments claim that in Russia the number of migrant workers alone is 5–6 million (about 7% of the total Russian employed workforce).

In the EAEU, a citizen of any member state is eligible to work in another member state without being subject to licensing and quota regimes. The labour migrants and their family members enjoy medical protection and access to educational facilities (EDB Centre for Integration Studies 2012; Vinokurov, Pereboyev, 2013; EDB Centre for Integration Studies 2015a). The national validation of diplomas is no longer needed, except the legal, pharmaceutical, medical, and educational domains. What the EAEU has managed to create within the last few years is actually a substantial achievement.

At the moment, the two common labour markets functions side by side – a well-developed and mature European one and a nascent Eurasian one. In our opinion, due to the extreme sensitivity of labour migration, this issue should be left off the EU-EAEU agenda for now. At the same time, the issue of the mobility of pensions should be dealt earlier and independently in relation to the general labour migration issues.

3. Mobility of pensions: An efficient system based on the principle of proportionality

Proposal: An EU-EAEU agreement on the mobility of pensions based on the principle of proportionality (proportional pension accrual).

The term “portability of supplementary pensions” (or “mobility of pensions”) refers to the transferability of occupational pension rights and is particularly important in the context of increasing worker mobility, in particular mobility by the self-employed. A supplementary pension is a retirement pension provided for in the rules of a supplementary pension scheme established in conformity with national legislation and practice.

World Bank and Eurasian Development Bank experts in their recent joint report suggest mechanisms for the CIS region to tackle pension problems of migrant workers (EDB Centre for Integration Studies, 2014). This theme is relevant for both the EU and the EAEU and can become an issue in mutual cooperation.

EU Experience

One of the core rights in the European Union is unrestricted workforce mobility. This right is ensured through regulations designed to coordinate national social security schemes. The regulations are now also effective in the EEA countries (Norway, Liechtenstein, and Iceland) and Switzerland. Currently these regulations cover early retirement as well as traditional retirement benefits. Note that in the EU they are mostly focused on coordination, rather than harmonisation and unification, of national pension schemes. This means that each EU country is entitled to preserve its own national pension scheme.

Box 4. The mobility of pensions: European experience of cooperation with other countries

According to the European Commission official information (European Commission, 2015b), every country where a pensioner has been insured for at least one year will pay him an old-age pension, when he reaches its national pensionable age. For example, if a pensioner has worked in three countries, he will get three separate old-age pensions. The pension will be calculated according to pensioner’s insurance record in each country: the sum he will receive from each of these countries will correspond to the length of his social security coverage there. Even if a pensioner has worked in several countries, he should apply for his pension in the country where he lives, unless he never worked there. In the latter case, a pensioner should apply in the country where he last worked.

In 2014, the European Parliament approved an EU Directive designed to improve the acquisition and preservation of supplementary pension rights of persons moving within the EU (KPMG, 2014). Under the new legislation, EU workers may now enjoy full international portability of pension rights when moving abroad. Conditions governing the acquisition of pension rights are strengthened to the effect that, where a vesting period and/or a waiting period is applied, the total combined period shall not exceed three years. The minimum age for vesting shall not exceed 21 years.

National measures should ensure that the vested pension rights of outgoing workers can remain in the scheme in which they vested. However, schemes also have the option of paying the worker a capital sum up to a certain nationally established threshold and with the worker’s informed consent, including as regards applicable charges. Outgoing workers’ and their survivors’ dormant pension rights or their values should be treated in line with the value of the rights of active scheme members, or the development of pension benefits currently in payment, or by other means which are considered fair treatment.

Approaches for the EAEU

Pension portability is an urgent issue that should be solved promptly through a common pension space. Russia and, to a lesser degree, Kazakhstan, serve as magnets for millions of labour migrants. According to the Russian Federal Migration Service, nearly one third of all migrants coming to Russia are of pre-retirement or retirement age. Hence, we are talking about 2-2.5 million migrants out of the total pool of 6-7 million. For this reason, pension issues are of high importance. Riskfree 100% portability of pension rights and assets of employees and the self-employed between donor countries and recipient countries is critical both to migrant workers and for sustainable economic development of states involved in Eurasian economic integration.

To implement the common pension space within the EAEU, experts have identified several conditions that make this project essential. Several options for introducing the common pension space have been considered. Currently, the Eurasian Economic Commission coordinates the work on the draft Treaty on Pension provision (information as of April 2016). A complicated system might ensue as a result of drastic differences of national pension legislations. Tentatively, the socalled ‘base pensions’ would be paid the states of residence, while the voluntary component and the so-called ‘stage’ components can be allocated based on the principle of proportionality.

Box 5. The mobility of pensions: Russian experience of cooperation with other countries

According to Pension Fund of Russia (PFR) statistics, in 2014 there were 265,241 pensioners living abroad who received a Russian pension. The total paid out to these persons was RUB 31.4 billion. Most Russian pensioners living abroad are in Germany – 96,900, followed by Israel – 40,500, and Latvia – 21,500, but there are no agreements between Russia and these countries; the same is true of the USA, Finland, and Canada, despite the large number of Russian pensioners living there (PFR, 2015). The distribution of labour pensions, according to Russian Federation legislation, is independent of the beneficiary country and citizenship. Cooperation with particular countries in pension security is carried out in accordance with special contracts (agreements). In 2010 the PFR was executing 14 international pension security agreements of the Russian Federation with 18 countries.

The agreements with Lithuania, Georgia, Estonia, Slovakia, Romania, Hungary, and Mongolia are based on the territorial principle, according to which the pension security of citizens is carried out according to the legislation and at the expense of the beneficiary country. Mutual accounts are not settled. The agreements between the Russian Federation and Bulgaria, Spain, Belarus, and Ukraine are based on the proportional principle, under which each side pays pensions according to the pension rights acquired in that country.

Payments of Russian Government Pensions to Russian citizens living in Israel are processed through Israel Post. The Postal Bank enables pensioners to receive their pensions in Israel, to 11 receive their pension payments in Israel directly into their accounts, without commissions and at preferred exchange rates. Pension payments are transferred via SWIFT, by the pension provider in Russia. The pension sums are converted from roubles to dollars according to the representative exchange rate of the dollar in Russia.

4. Recognition of professional certificates and diplomas

Proposal: Reciprocal recognition of professional certificates and degrees between the EU and the EAEU (with a number of exemptions).

EU and the EAEU member states have different practices for recognition of academic and professional qualifications. Progress in mutual recognition would be helpful to improve the mobility of labour. The main question is: To what extent is the mutual recognition of professional certificates and diplomas possible? While the priority vector should be for the expansion of mutual recognition, it is evident that a number of exemptions will remain.

Box 6. EU recognition instruments

In 1979 the European Community states signed the UNESCO Convention on Recognition in the European Region. Then in 1997, the Council of Europe signed the UNESCO Convention on the Recognition of Qualifications concerning Higher Education in the European Region (Lisbon Recognition Convention; it was also ratified by Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan). Mutual recognition of professional qualifications is regulated in the EU by a General Directive (General System of Mutual Recognition of Professional Qualifications) and additional instruments (the European Qualifications Framework/Professional Qualifications Directive) which do not cover third-country nationals; as well as national, bilateral, and multilateral agreements, etc. (Plimmer, 2004; Galaktionov, 2004).

Mutual recognition in the EU does not mean that the rules are the same in all member states. It means acceptance of the standards that are the norm in all the other member states in the Union, and the principle relies heavily on the political willingness of member states to respect the principle of free movement across technical barriers (Plimmer, 2004).

Within the EAEU, recognition processes are regulated by several agreements signed by the CIS countries (Agreement of the Commonwealth of Independent States on the Mutual Recognition of Higher / Higher Professional Education, Minsk, May 31, 2013), several other agreements of the CIS and Eurasian Economic Community member states, and several intergovernmental agreements).

The process of recognition of education certificates among EAEU member states is particularly urgent for Russia, mainly because of two factors: heavy outflow of qualified workers from Russia and the migration into Russia of Russian-language population from the CIS countries. The EU experience of professionals’ free movement within the Single Market is very useful for the EAEU.

What about cooperation between the EAEU and EU member states? We can name only a few agreements on mutual recognition of education documents between Russia and some EU countries (France, Italy, Romania). As concerns the recognition of third countries’ diplomas, each EU country follows its own national rules. The European Commission and the Eurasian Economic Commission could start a dialogue on mutual recognition instruments between the EU and EAEU.

5. Large-scale educational exchanges: A trans-Eurasian Erasmus Mundus and a “Chokan Valikhanov” program for the EAEU

Proposal: A truly large-scale educational exchange programme between the EU and EAEU; a “Chokan Valikhanov” educational exchange programme for the EAEU, modelled after Erasmus Mundus.

Cooperation in the educational sphere is largely based on academic mobility, which means a vigorous exchange of undergraduate and postgraduate students, PhD students, researchers, and both younger and senior lecturers, among educational institutions worldwide.

The main instrument of education exchange between the EU and EAEU member countries is the Erasmus Mundus program. However, the exchange flows are still low. There is a huge and untapped potential in the EU-EAEU education exchange for undergraduates, graduate students, Ph.D. students, lecturers, and researchers, in particular in the under-35 age group.

Box 7. Attractiveness of a European education for CIS citizens

The population of the EAEU member states has a strong interest in education in Europe. As the EDB Integration Barometer demonstrates (EDB 2015b), 20% of the Armenian population would prefer to get an education for themselves or their children in Germany, 21% in France (in 2014 the preferences were 14% and 12%, respectively). In Russia, 14% are interested in Great Britain (in 2014 this parameter was 23%). In Belarus: 16% prefer Great Britain, 14% Germany. In Kazakhstan: 15% of the population prefers Germany, 13% Great Britain. The population of Tajikistan shows growing interest in Great Britain (from 5% in 2014 to 15% in 2015) and Germany (from 7% in 2014 to 18% in 2015).

Incidentally, the winners of Kazakhstan’s Bolashak government-sponsored scholarship programme prefer to study in Europe. Up to 50% of Bolashak recipients studied in Europe, compared with 5% in East and Southeast Asia (plus 28% in the United States and 9% in Russia) (Vinokurov, 2013, based on the Centre for International Programs (Bolashak’s administrator) data).

The EAEU should adopt the European experience, which has proved to be very effective in scaling up educational exchanges. Strengthening educational ties – from secondary school, undergraduate, postgraduate, and academic exchanges, to the harmonisation of curricula and the mutual recognition of graduation certificates – is a key instrument of long-term integration. A programme of mass secondary school, university, postgraduate and academic exchanges, which would be similar to, for example, Europe’s Erasmus Mundus programme, still needs to be developed and launched.

We suggest a large-scale programme of educational exchange with the EAEU which could be named after Chokan Valikhanov, a Kazakhstani explorer and geographer who received his education in Tomsk, Russia (Vinokurov, 2013). Within this programme, co-financing procedures could be established, comprising monies from families, state budgets, and universities. It could be structured as a system of grants which would cover, in full or in part, the expenses of studying abroad for one or two semesters. The primary task would be to make the programme a large-scale one, with an annual intake of tens of thousands of students.

As concerns EU-EAEU exchanges of students and educators, the current Erasmus Mundus exchanges should be expanded manifold. Russia, Kazakhstan, and Belarus are currently middleincome countries. There is a sizeable segment of households which is quite able to pay a certain share of expenses. Truly large-scale educational exchanges can be attractive for both sides, resulting in hundreds of thousands of students and faculty crossing the borders yearly. One of the problems to be overcome is the monodirectional nature of the current academic exchanges: the flows to the EU are several times larger than vice versa.


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