Remy Steinegger
World News /23 Oct 2014
10.23.14

Economic Consequences of the Eurasian Economic Union

The Eurasian Economic Union (EEU), which has now been ratified by Russia, Kazakhstan, and Belarus, received Armenia as the latest signatory on October 10, 2014. The EEU will enter into effect on January 1, 2015 at the same time that the Commonwealth of Independent States (CIS), along with its functionality and relevance, is coming apart at the seams.

The Ukraine, Moldova and Georgia have signed association agreements with the European Union (EU), and nations like Azerbaijan did not receive a formal invitation into the EEU. The creation of the EEU and its implementation promises to promote investment and growth among the involved nations, particularly among the smaller landlocked nations like Armenia and Kyrgyzstan. However, geopolitically the EEU adds another layer of complexity to inter-Caspian relations as the region seems now divided in half, and where the Nagorno-Karabakh issue remains unresolved.

An earlier draft of the yet EEU agreement seemed to imply the creation of a customs post between Armenia and Karabakh, which locals see as an unfortunate division between two very closely linked peoples.

If such a custom post is created, it would serve as evidence that Armenia will go to great lengths to cooperate and appease Russia even at the expressed concern of the occupied regions it has suffered so much isolation to defend. From a legal viewpoint, however, a custom post makes sense. Neither Russia nor Armenia claim that Karabakh is a part of Armenia, so the territory cannot be part of the EEU.

Russian President Vladimir Putin cited improvements in Armenian policies in its common standard practices as a good indicator of progress and expressed “hope that in the first two years after Armenia’s joining we will see a positive macroeconomic effect.” The Eurasian Economic Union summit in Minsk, where the deal with Armenia was signed, also saw the creation of a roadmap for Kyrgyzstan’s joining of the EEU.

The same day that Armenia signed the EEU agreement, Azerbaijani President Ilham Aliyev, also in Minsk, reiterated the importance of the Commonwealth of Independent States (CIS). He stated “the initiative that Azerbaijan promotes in the CIS, as well as with regional and bilateral cooperation, serves to reinforce security, predictability and cooperation.” The continued cohesion of the CIS is under question, however. Belarussian President Alexander Lukashenko acknowledged that “unfortunately disintegration tendencies are growing in the Commonwealth, especially considering attempts by individual well-wishers to bury CIS.”

Undoubtedly, the EEU will further pull participating nations into a dependent relationship with Russia. While economic ties will grow both ways, the sheer economic size of Russia will tower over its fellow EEU members. This will afford it greater leverage over its fellow members. Russia accounts for a staggering 87% of the EEU’s GDP.

Armenia’s participation in the EEU will likely produce greater investment and cooperation with over EEU nations, however these pale in comparison to the economic advantages it could experience over a peaceful settlement over the Nagorno-Karabakh conflicts. What seems most likely is a continuation of the status quo in the region.

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