The past, present and future of the Eurasian Economic Union

_ Tigran Sargsyan, Chairman of the Board, Eurasian Economic Commission (EEC). Moscow, 18 October 2017.

The EEC a body responsible for administering the Eurasian Economic Union (EAEU)’s day-to-day business and treaty obligations. Before joining the Eurasian Economic Commission in 2016, Mr. Sargsyan was the Chairman of Armenia’s Central Bank from 1998 to 2008, Prime Minister of Armenia from 2008 to 2014, and Armenia’s Ambassador to the United States from 2014 to 2016. On September 21, 2017, Samuel Ramani interviewed Mr. Sargsyan to hear his opinions on several major challenges facing the Eurasian Economic Union. The transcript of the interview is below:

- Even though the EAEU’s primary mandate is to stimulate intraregional trade, some customs union members have periodically been reluctant to expand their trade links with other EAEU member states. This reluctance was evidenced by a marked overall decline in Kazakhstan’s trade with other EAEU member states immediately after it joined the customs union. What do you think explains the reluctance of some member states, like Kazakhstan, to focus on intraregional trade, and how successful has the EAEU been in expanding intraregional trade partnerships?

-  In order to answer your question, first we must understand how you assessed this reluctance. We can assess the desires of member states at the level of president, parliament, and ministers, by looking at what they have said. But I haven’t seen any public area where Kazakhstan expressed this kind of reluctance. I can’t theorize on the topic of desire but I can explain what is going on in our Union.

From 2015-2016, intraregional trade declined by more than 20 percent because of declining oil and gas prices. It is evident that global economic forces triggered the fall in oil and gas prices. That is why we can’t speculate on what happened in the Eurasian Economic Union and conclude that the reduction of mutual trade was triggered by internal Eurasian factors. And we can see that in 2017, this decline in intraregional trade was overcome, and all the EAEU member states registered positive GDP growth and increases in intraregional trade. In 2017, we observed almost 30 percent growth in mutual trade as well as 30 percent growth in trade with third countries. We also forecast that there is a great capacity for GDP and mutual trade growth in the years to come.

To stimulate intraregional trade growth, we have worked on eliminating trade barriers within the EAEU. We have listed 185 obstacles to intra-egional trade and have already reached a consensus on eliminating on 61 of them. We published on our progress towards tackling these issues in the “white book.” In addition, since 2016, we eliminated 10 major trade barriers, and more than 30 percent of the Eurasian Economic Union’s decisions have been devoted to the elimination of these obstacles.

- Many Western critics of the Eurasian Economic Union have argued that the EAEU is primarily a political project that aims to entrench Russia’s hegemony over the CIS region. How does the EAEU ensure that smaller nation-states are not forced to comply with Russian preferences; and that the EAEU does not suffer from the democratic deficit that plagued the European Union’s effectiveness?

- The Eurasian Economic Commission has taken several steps to ensure that smaller member states, like Armenia and Kyrgyzstan, can influence the EAEU’s decision-making process. All the EAEU member states have equal representation within the union’s governing body. Armenia and Kyrgyzstan have the same number of ministers as Russia, Kazakhstan, and Belarus. The decision-making process in the EAEU operates by forging a consensus between the member states. Smaller member states have the right to block decisions that are against their interests, and smaller states can influence the policies adopted by larger countries. The creation of the EAEU has expanded the economic influence of smaller nations, as these countries now have influence over decisions made in a governing body that has 180 million residents. Russia has welcomed this change, and Moscow’s decision to delegate decision-making on economic issues to supranational entities was aimed specifically at preserving the sovereignty of smaller states.

- The Eurasian Economic Union has attempted to expand its economic influence outside the CIS region, by creating a network of free trade agreements and holding discussions about EAEU membership with countries around the world. Do you think that Russia will welcome the inclusion of large non-CIS countries like Turkey into the EAEU, even if this inclusion dilutes Moscow’s influence over the organization? And how does the EAEU convince U.S. allies and EU member states to sign free trade agreements with the organization, when signing a free trade pact with the EAEU could have a considerable diplomatic backlash?

- The EAEU holds negotiations on free trade agreements with those countries that address us. There are a lot of countries that fit into this category. The presidents of all five countries of the EAEU arrive at a consensus on which free trade agreements should be prioritized. Any member state can block a trade agreement decision. Before making such decisions, we carefully consider their economic implications, and how profitable it will be to strike this agreement. Right now, we have a free trade agreement that is being negotiated with Vietnam. Our presidents have given us the mandate to hold negotiations with six other countries on free trade agreements. These countries include Egypt, Israel, India, Iran, Serbia, and Singapore. We are planning to sign a trade-economic agreement with China as well.

I would like to emphasize that free trade agreements are not the only tool we have to expand our international presence. We have memorandums that have been signed with nine other countries. These countries include Greece, Mongolia, Moldova, Chile, Peru, Singapore, Cambodia, Jordan, and Morocco. We are ready to sign a memorandum with Bangladesh, Cuba, Thailand, and a number of other countries. About 50 countries around the world want to cooperate with the EAEU, and some of these countries have raised questions about accession to our union.

The EAEU is a purely economic institution, and makes decisions strictly on economic feasibility. Unfortunately, the lack of dialogue between the EAEU and the European Union ensures that agreements with EU member states cannot be documented. But European businesses have been working with us at the national-level. We are invited into business deals with countries like the United States, Germany, Italy, and Greece. In those countries, businesses take interest in our operations.

However, the reluctance of the EU countries to cooperate with us influences our international trade relations, and the EAEU has consequently focused on strengthening its ties with the Asia-Pacific region. In 2016, we noticed that increased trade with the Asia-Pacific region countered corresponding declines in trade with the EU. Now the share of our imports from the Asia-Pacific region is higher than our imports from the EU. It is interesting that business leaders’ desires do not match those of policymakers. This contradiction has been explored at the St. Petersburg economic forum for the last two years. The business leaders of the EAEU and the EU are interested in expanded cooperation but the overall trend is still in the reverse direction.

- Since the mid-1990s, maintaining open borders in the CIS region has been a central element of negotiations over the creation of a customs union in Eurasia. Some countries, like Kazakhstan, have been unwilling to completely enforce this open borders policy, because of concerns about the movement of terrorist groups and illegal drugs within the EAEU. How has the EAEU managed to convince member states to fully comply with the open borders policy and overcome border disputes?

- First of all, it is necessary to separate the issues of borders and customs. The Eurasian Economic Union, as an economic organization, is strictly interested in customs and the physical movement of goods across borders. The threats of terrorism and drug trafficking, which you mentioned, are and will be security issues that are discussed in the Collective Security Treaty Organization (CSTO).

In addition, I would like to mention that digital security is a growing challenge. It seems to me that we can’t contradistinguish digital security from other security challenges. It is necessary to find solutions. In this respect, we do not differ from the European Union.

- The EAEU has expressed interest in deepening its cooperation with the Shanghai Cooperation Organization (SCO) and Chinese-led economic projects, like One Belt One Road (OBOR) and the New Silk Road. How does the EAEU ensure that its intraregional trade mandate does not clash with OBOR? And does the EAEU view China’s growing influence in Central Asia as a threat?

- The existence of a subnational dialogue between the EAEU and China does not cancel bilateral links between China and the member states. We have been holding negotiations with China based on the authority and mandate that was given to us by our presidents. The other issues, which are not included in our mandate, are topics of negotiations at the national level. The EAEU’s economic cooperation with China is targeted to benefit the EAEU’s economic interests. Chinese policymakers have the same approach. So we do not see China as a threat. China and the EAEU have many points of mutual interest. For example, we both believe the harmonization of standards will stimulate business cooperation and remove bureaucratic red tape. It is natural that we will make decisions that reflect our interest. And this question is not unique to China, if we come back to the previous question about the influence of big countries on small ones. The trade partnerships forged between the EAEU member states and China resemble those that the U.S. forms with its neighbors and smaller countries.

Source: https://thediplomat.com/

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