_ Maria Kotova, Dezan Shira & Associates. Saint-Petersburg, 6 December 2018.
The members of the Eurasian Economic Union (EAEU) may abandon border procedures and adopt a common currency in the future, following the path taken by the European Union (EU), according to the President of Kyrgyzstan Sooronbay Jeenbekov.
“I strongly believe in the future of the EAEU, we have a tremendous potential. The EU has a single currency, and of course we will also come to this, but time is needed. We must introduce the best of what the European Union has… we must work towards that. Like in the European Union we have no borders, no border guards. All our nationals are freely traveling across the Union and are entitled to same services, no matter which – medical, educational and financial.”
The EAEU was established in 2015, and now includes Armenia, Belarus,Kazakhstan, Kyrgyzstan and Russia. It sits geographically between China and the EU, has a population of 189 million and a combined GDP of 5 trillion dollars. Intra-EAEU trade grew by 38% last year. The union is designed to ensure the free movement of goods, services, capital and workers between member countries.
Moldova is an observer nation, while in 2016, Vietnam officially became the first non-regional country to establish a free trade agreement with the bloc. More than 40 countries and international organizations, including China, Indonesia, and Israel, as well as some South American countries, have expressed interest in a free-trade deal with the EEU. The trade bloc is also holding negotiations with South Korea, Egypt, and India.
Jeenbekov stated that the EAEU member countries should work towards boosting competition with third countries. “The EAEU countries can compete with other foreign nations. We must work in coordination in this issue. I believe that in 2040, the economy of our countries will be the same as in the European Union, the US, Japan and in other leading nations.” The Kyrgyz president said that the Eurasian Economic Union should expand by admitting new members. “Other countries can also join the EAEU, we can expand, and we must work towards this as well.” EAEU trade has already significantly de-dollarised, with about 70% of intra-Union trade conducted in other currencies, with the ruble dominating trade.
Last year, the Central Bank of Russia (CBR) also proposed to create a joint digital currency for BRICS countries and the Eurasian Economic Union (EAEU). It could replace the US dollar and other currencies used in settlements among the member states. Chris Devonshire-Ellis of Dezan Shira & Associates comments “Russia has been investigating how digital currencies can be regulated and utilised in commerce and is actively seeking ways to move away from US dollar usage in international transactions. This, combined with Russian and Chinese development of blockchain technologies could pave the way for the future launch of a Eurasian digital currency. The political desire is already there and the technology will soon follow.”
The member states of the Eurasian Economic Union (EAEU) – Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia – are considering creating a digital currency in 2020 or 2021, the Russian deputy finance minister Alexei Moiseev stated last week.
Such a move is “inevitable,” the TASS news agency quoted Moiseev as saying, because of increasing difficulties in trade and exchange calculations and due to Western sanctions which affect “a growing number of organizations.”
While Russia is exposed to the threat of additional sanctions, the response “must be a reliable international payment systems independent from the US dollar.”
Even certain states outside the EAEU have expressed interest in such a project, said Moiseev, since they are important trade partners of the EAEU member states.
The EAEU-backed single currency could be similar to the European Currency Unit (ECU), the basket of the currencies of the European Community member states in use between 1979 and 1999.
The project will most likely be implemented without using blockchain technology, Moiseev added.
Discussions between the EAEU member states will be held all along 2019 and perhaps even 2020, the deputy minister indicated.
Since the Ukrainian crisis in 2014, Russia has been actively seeking to reduce its dependence on Western-dominated international financial systems. A key part of this strategy has been the introduction of the MIR national payment card. No less than 58 million online transactions were performed using MIR cards during the first eight month of this year.