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The EEU at a Glance
According to the EEU’s official portal, its history dates back to March 1994 when Kazakhstan’s President Nursultan Nazarbaev delivered a public lecture at the Moscow State University calling for open borders, removal of customs barriers and the creation of a common economic space in the Commonwealth of Independent States (Eurasian Economic Union 2015). Nazarbaev’s dream did not progress much beyond the proliferation of bilateral and multilateral free trade agreements until 1999, when Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan signed the Treaty on the Customs Union (CU) and Single Economic Space (SES). The CU became fully operational in 2010 among Belarus, Kazakhstan and Russia, and the SES came into effect in 2012 with the same membership.
Contrary to the caricature-like explanation that the CU was “suddenly declared” by Putin simply because he “wanted to prove his importance” having left the presidency shortly before (Aslund 2015); the quest for common tariffarrangements and an integrated internal market in the former USSR has a lengthy record of trials and errors and ferocious bargaining. The CU’s normative base by 2012 comprised more than 70 international treaties signed since 1995 and 900 technical regulations. It also contained between 600 and 2000 exceptions and exclusions (Chufrin 2014, p. 11). The SES legislative framework consisted of 17 interstate agreements outlining the principles of achieving the “four freedoms”, that is, the free movement of goods, capital, services and people. The EEU Treaty signed in May 2014, a bulky 1000-page document, represented an amalgamation, streamlining and deepening of the extant CU and SES instruments, and had two additional sections on the organisation’s institutions and procedural matters, for example, admission of new members and termination of membership.
Article 4 of the treaty identifies the EEU’s three central objectives: creating conditions for stable economic development; formation of a unified market of goods, services, capital and labour resources and modernisation and increased competitiveness of national economies within the global economy. It paved the way for the practical implementation of single markets in service provision (across 43 sectors) and labour in 2015, and set concrete benchmarks for single markets in pharmaceuticals and medical equipment (2016), electricity (2019) and hydrocarbons
(2025). It made provisions for a unified transport system and a joint financial regulator to coalesce by 2025.
The treaty’s preamble and multiple articles contain numerous references to the norms, rules and principles of the World Trade Organisation (WTO). A separate agreement “on the functioning of the CU within a Multilateral Trade System” declares the priority of the WTO rules in the CU legal framework and obliges the CU to fulfil conditions undertaken by countries entering the WTO. The process of harmonisation between WTO and CU rules is ongoing, and has already led to the reduction of the CU Common Customs Tariff’s weighted average rate from 10 % in 2012 to 8.7 % in 2014 (Eurasian Economic Commission 2014c). Further belying the perception that the CU is a protectionist entity (Aslund 2015) is the fact that it deploys few defensive trade measures against external partners - less than half the number of the EU or China, four times fewer than the United States and six times fewer than India (Slepnev 2014, p. 8).
The EEU’s two peak bodies are the Supreme Eurasian Economic Council (SEEC), consisting of the heads of states, and the Intergovernmental Council comprising the heads of government. Both are convoked from time to time, and make decisions on a consensual basis. The organisation has only two permanently functioning supranational institutions inherited from the SES: the Eurasian Economic Commission (EEC) and the Eurasian Court (EC). The EEC, whose mandate is “to create an environment conducive to the smooth operation of the CU and the SES and to submit proposals that contribute to accelerating the integration process” (Eurasian Economic Commission 2014a, p. 26), draws top officials on a parity basis from all participating states, and each member on the council and board of the EEC has one vote. This is in contrast with the now defunct supranational organs of the CU where representatives of Russia used to enjoy 57 % of the vote.
The EEC, located in Moscow, has professional staff of about 1200 but its executive remit continues to be weak; it functions primarily as an expert, consultative and monitoring unit. Its directives, just like the rulings of the EC, are subject to multiple checks and often become mere recommendations to national actors. The EEC Board makes decisions by consensus and by qualified majority. Any issue resolved by the Board may be blocked by the EEC Council, where voting is by consensus only. All EEC resolutions may be revised or dumped by the Supreme and Intergovernmental Councils (Kalish 2014, p. 23).
The treaty refers to the parties’ commitment to coordinated macroeconomic policies. In practice, the violation of guidelines concerning levels of government debt and the rate of inflation does not incur sanctions or penalties as is the case in the EU. Typically, in May 2014 the EEC noted that in Belarus “the inflation rate was exceeded considerably” (in fact overshooting the maximum critical value by 8 %), and meekly expressed hope that its authorities would continue taking steps to address the issue (Eurasian Economic Commission 2014b, p. 3). Article 118 of the treaty provides for an easy exit from the EEU: a member state should give a 12-month notice to its partners after which it ceases to be bound by the treaty and other legal instruments concluded under the union’s aegis.
Although it is important to understand what the EEU stands for, it is also imperative to know what it does not do. Its statutory documents and institutions do not provide for the movement towards common foreign and security policy, citizenship, currency, and health, culture and legal systems. A supranational parliamentary body is not contemplated in the foreseeable future. The possibility of deeper integration in all these areas was included in the original proposals for the EEU Treaty tabled by the Russian Academy of Foreign Trade in February 2012. Over the course of five rounds of negotiations, 18 summits, and 247 meetings of expert groups (Eurasian Economic Commission 2014d, p. 20) the final version of the treaty adopted in May 2014 was completely devoid of the political dimension. This was a direct result of the position taken by Belarus and Kazakhstan (Netreba and Butrin 2013; Ionova 2014, pp. 10-11). As Kazakhstan’s first deputy prime minister, who led his country’s negotiating team, explained:
The Eurasian Economic Union is not a political association. This is the most important thing. Economic cooperation is the exclusive subject of the Treaty. Our negotiating team has fully defended the line on the inadmissibility of the Union’s politicisation and the debating of questions touching on national competencies and state sovereignty (cited in Mamaev 2014).
At present, the EEU appears to be a regional trading arrangement (RTA) that is rather common in world practice. On the scale of six levels of integration, ascending from preferential trading regime to “deep integration” where an RTA becomes indistinguishable from a nation state as a single unit in global economy (Pomfret 2006), it has just begun transition from a common market (Level 4; customs union + free movement of factors of production) to an economic union
(Level 5; common market + common economic policies). Whether the EEU will expand into new policy areas remains to be seen. What is clear however is that smaller countries such as Kazakhstan have been actively shaping the bloc’s evolution. They are realistic about the challenges lying ahead including the problem of confrontation between Russia and the West over Ukraine, yet they remain optimistic about the EEU’s long-term prospects. In April 2014, Nazarbaev criticised both those who wished the EEU to fail and the “maladroit impatience” of some experts in cobbling together a supranational union. His view of the EEU was not that of “ a shiny white snowman” that would succumb easily to crisis situations in global and national economies or geopolitical turbulence (Nazarbaev 2014d).