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President Nazarbayev has continued to encourage greater efforts at regional integration most notably through his February 2005 peechs where he called upon the Turkic states to cooperate much more closely.

Eurasian Union = Energy Union?

Avrasya Birliği = Enerji Birliği?

Süreyya YİĞİT

Özet Bu makalede Avrasya Birliği ve örgütün iskeletini oluşturan merkezi kurumlar tanımlanıp Avrupa Birliği’nin kurumları ile karşılaştırılarak farklılıkları not edilmektedir. Dugin’in neo-Avrasyacılığının temel ilkeleri belirlenip tanıtılırken, Avrasya Birligi’ni teorik olarak nasıl açıkladığına dair ışık tutulmaktadır. Avrasya Birliği’nin kuruluş ve genişleme amacında enerjinin rolü, ne kadar itici güç olup olmadığına dair yanıt aranmakta ve Rus dış politikasında enerjinin tarihte çok mühim bir yer edindiği kabullenerek bu gerçeğin Birliğe nasıl yansıdığı analiz edilmektedir. Avrasya Birliği’nin çekici gücünü ölçmek için coğrafi olarak ya- kın devletlerin tutumlarını belirlemekte fayda vardır. Bu perspektiften bakıldığında Türki devletlerin yak- laşımları Avrasya Birliğinin geleceği hakkında önemli ipuçları vermektedir. Son olarak, Avrasya Birliği’nin Rusya’nın akıllı güç bağlamındaki etkisi belirlenmektedir.

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Abstract to attract others due to their desire to emulate. One of the most significant contemporary inte- This article aims to provide insights as to the the- gration efforts underway is, without doubt, the oretical explanation ascertaining to the Eurasian Eurasian Union. Union and identifying the central institutions that form the nucleus of the organisation. The Regional Integration main tenets of neo-Eurasianism relating to the Eurasian Union are identified and introduced. As with all integration schemes it is important Resemblances and differences comparing it with to discover the theoretical explanations for such the European Union are entered into, measuring efforts as well as identifying the key institutions up relevant powers and institutions before evalu- that form and shape future trajectories. Fur- ating the role of energy. Answers to the question thermore, it is essential to discern which forces concerning whether energy is the driving force be- and economic sectors drive the integration pro- hind the Eurasian Union are sought for. Pursuing cess forward. In this respect, the role that ener- an analysis of the centrality of energy in Russian gy plays in defining the Eurasian Union is one foreign policy, the level of internal and external theme that has been publicly raised.2 Finally, to attractiveness of the Eurasian Union is gauged fully understand and evaluate any regional inte- with specific reference being made to potential gration effort, it is constructive to measure the Central Asian expansion. level of external attraction. Keywords: Eurasian Union, Energy, Central President Putin is widely touted as the chief ar- Asia, Neo-Eurasianism chitect of the aforementioned Eurasian Union. Whilst taking nothing away from the Russian 2013 is a year which commemorates many anni- President, such an evaluation completely ignores versaries relating to regional integration. In fact, the fact that the original instigator of Eurasian 2013 has been declared the year of Africa by the integration was in fact the Kazakh President African Union; as it is fifty years since the found- Nursultan Nazarbayev having first proposed it ing of the Organisation of African Unity. 2013 is in a speech made in 19943. President Nazarbayev also the forty-fifth anniversary of the establish- has continued to encourage greater efforts at ment of the Association of South East Asian Na- regional integration most notably through his tions, as well as the fortieth anniversary of the February 2005 speech where he called upon the first enlargement of the European Union. It was Turkic states to cooperate much more closely4. also thirty years ago that the U.S. Congress ap- proved of the North American Free Trade Area. Theoretical Underpinning Integration efforts are magnets of attraction, as the more successful they are, the more states Probably the most popular theory providing an queue up to join. In some ways they are examples explanation for the existence and deepening of of what Nye has termed ‘soft power’1, the ability the Eurasian Union is what is termed as neo-

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Eurasianism, which emerged in the second half Figure: 2 Multi-polar World 4 Zones Big Spaces of the 1980s. The most well-known proponent of this idea is Alexander Dugin. The central notion of the theory is the rejection of the universalism of Atlanticism and Americanism5. The theory states that it belongs to a new political language and an intellectual context that is in the process of creation. As seen in Figure: 1, it is a strategy that encompasses the whole globe, whilst ac- knowledging the end of the nation-state. Dugin believes the neo-Eurasian idea does not fully correspond to the geographical borders of the Eurasian continent6. Source: http://evrazia.org/modules.php?name=News &file=article&sid=1886 Figure: 1 Neo-Eurasian Map of a Multi-polar World Neo-Eurasianism views the world as consist- ing of four poles and as can be seen in Figure: 2, within the Russia-Eurasian Big Space, great im- portance is attached to the Russian Federation closely integrating with the member states of the CIS. This integration is meant to expand further beyond to attract the Muslim countries of Tur- key, Iran, Pakistan and Afghanistan. The third and final stage is to branch beyond the Asian members of the CIS, to incorporate India into the Pan-Eurasian zone.

Source: http://evrazia.org/modules.php?name=News Within this zone, Iran, India and Turkey all play &file=article&sid=1886 crucial roles. The most important region, how- ever, remains Central Asia. Dugin asserts that The nation-state is considered to be undergoing «Central Asia must move towards integration a transformation into a global state, additionally, into a united, strategic and economic bloc with it is suggested that there are several global zones the Russian Federation within the framework of which provide alternative versions of globalisa- Eurasian union, the success of this CIS»9. More- tion7. This particular globalisation is one which over, within this context he also highlights the opposes the current dominant Atlanticist ver- fact that the Russian Federation has «energetic sion. The Eurasian idea that is espoused offers interests (and) a common strategic security sys- “autonomous living spaces [whereby]…. coali- tem» with Central Asia10. The energy linkage tions of states, [can be] reorganised into conti- topic will be analysed in greater detail later on. nental federations or ‘democratic empires’ with a Neo-Eurasianism, when broken down into its large degree of inner self-government»8. basics, is simply the process of (re-) integrat-

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Dugin declares that “today, the Eurasian Union is continuing these traditions of integration through a unique ideological model”.

ing the post-Soviet territories. After referring to isation, the degree of contact and the level of the Czarist empire and the Soviet Union, Dugin integration have not been seen as sufficient by declares that «today, the Eurasian Union is con- the Russian President. This was made clear in an tinuing these traditions of integration through article he wrote for Izvestia in October 201112, a unique ideological model that takes into con- outlining his vision for the current Eurasian Eco- sideration democratic procedures; respects the nomic Community (EEC) developing into a Eur- rights of nations; and pays attention to the cul- asian Union (EU) whilst providing examples that tural, lingual, and it features of all union mem- would be adapted from the process of European bers»11. integration.

Embryonic Eurasian Union President Medvedev made clear a month later President Putin shares some of the central tenets that both the positive and negative experiences of Eurasianism, such as rejecting the Atlanticist of the EU had been noted with caution, putting interpretation of globalisation and remains a forward the view that the Eurasian Union would firm believer in the states of the former Soviet avoid the problem of economic diversity be- Union establishing closer relations with each tween member states as witnessed in the euro- other. Whilst this already takes place in several zone as the three countries all had a comparable fora such as the Commonwealth of Independent level of economic development, as well sharing a States and the Collective Security Treaty Organ- common history and values.13

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b

The Eurasian Union that Vladimir Putin foresees Commission is financed by all three countries, is a work in progress. In July 2011, physical con- dependent on taxation shares received from the trols between Russia, Belarus and Kazakhstan Customs Union. were abolished, heralding the Eurasian Customs Union (ECU). These meant Chinese trucks laden Alongside the Eurasian Commission is – simi- with domestic goods could enter Polish territory lar to the EU - the Council, which is composed whilst crossing only one customs point; located of three Vice Premiers from the three member at the Kazakh-Chinese border. In 2015 they will states with each providing three more represen- metamorphosise into President Putin’s declared tatives to undertake the operational management goal of the Eurasian Economic Union. and oversee the day-to-day work of the organiza- tion. Here one notices the initial formula of the It is primarily trade that is at the heart of Eur- European Commission consisting of a represen- asian integration, which is why internal tariffs tative from each member state. In terms of vot- and non-tariff barriers needed to be eliminated ing decisions, a consensus needs to be reached, first, so that a large single market and investment which means each commissioner yields a veto. area could be created. The central aim in creat- ing the ECU was to ensure economies of scale, The Commission consists of several depart- accelerating not only trade specifically, but eco- ments, once again with its management struc- nomic development in general. The impressive ture quite similar to the European Commission’s credentials so far of this ECU are a market con- Directorates-General. In terms of staffing there sisting of 165 million people, a territory of more is a big difference compared to the European than 20 million square km with a GDP in excess Commission, as a quota system has been adopt- of $2.5 trillion.14 ed. The Eurasian staffs reflect the proportions of the populations of the member states: namely, INSTITUTIONS 84% Russian, 10% Kazakh and 6% Belarusian.16

I. Eurasian Commission Within the Commission, an executive body termed the Commission Board is composed of In terms of institutions of the Eurasian Union, three representatives from member states, each the Eurasian Economic Commission - loosely of whom is in charge of a particular depart- modelled on the European Commission - came ment.17 Board decisions can be made unani- to existence on 1 Jan 2012 as the supranational mously or with a qualified majority vote, de- governing body of the ECU. It is headquartered pending on the issues being discussed. The areas in Moscow with expenses relating to infrastruc- in which the Commission Board has jurisdiction ture and accommodation of commission admin- relates to monitoring and implementation of the istrators funded by Russia.15 The budget of the main policies, which leads to the conclusion that

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a two tier system of work within the commission concerning interstate complaints and cases be- exists. This is very different from the European tween individual firms and the Commission. It Commission. was precisely this latter matter that attracted the attention of interested observers when, despite The Eurasian Commission, as the regulating the Eurasian Court having full jurisdiction for body, has responsibility for ensuring the proper just two years, it arrived at a momentous deci- functioning and development of the customs sion in September 2012, in the case of “Yuzhny union. It has the authority to make decisions Kuzbass”.22 not only with regard to customs policies, but in the wider realm of macro economy, regulating The case concerned a major energy supplier competition, procurement, migration, energy disputing acts adopted by the Eurasian Com- 18 policy as well as financial policy. Overall when mission. Yuzhny Kuzbass defended its action of compared to the European Commission, the ca- no longer declaring its shipments of coal, bas- pacities of the Eurasian Commission are more ing this on a decision of the Council which had limited; for example, it can only outline its own abolished customs clearance of goods between budget, whereas the European Commission can member states of the Eurasian Customs Union. consolidate a draft budget and after receiving Council approval, implement the budget. The Court ruled in favour of the firm, uphold- ing its decision to no longer submit customs Furthermore, the Eurasian Commission can forms, declaring that the relevant article stipu- only make representations in member states and lating a customs declaration was contrary to the third countries, whereas European Commission Council decision. When the court’s decision was has the power to exercise full external represen- discussed in the camber of appeals two months tation as well as negotiating trade agreements later, it was upheld. The true significance of this with third states according to a mandate received decision is its proclamation that the laws of the from the Council.19 The Eurasian Commission, Customs Union are superior to national laws, on the other hand, is very much controlled by which is the very same principle that enshrines the Council through its decisions and existing supranational law within the European Union. legislation.

II. Eurasian Court This decision could in time be seen to be path breaking as it could be very useful in consoli- In terms of law, there is a similarity with the dating the integration process. It remains to be European Union, in that a Court has been es- seen whether this is indeed a landmark deci- tablished to deal with disputes. In 2004, due to sion which will have far-reaching consequences an agreement between the Eurasian Economic or that member states institutions will obstruct Community and the CIS, the CIS Economic those decisions that are not in their national/ Court of Justice had assumed the functions of commercial interests. Having said this, it must the Court of Justice of the Eurasian Economic be noted that when viewed from the perspective Community.20 In 2009, this Court was given the of the economy, the court with this decision was authority to settle disputes arising from the Eur- very helpful in terms of abolishing an important asian Customs Union. A year later, “an amended non-tariff barrier to customs union trade. version of the Statute of the EurAsEC Court of Justice was adopted”.21 It is this Eurasian Court Energy Origins which can pass judgments on disputes which have an economic or commercial dimension. When noting the development of Eurasian inte- The Court possesses the monopoly in interpret- gration, one argument that is put forward is of ing the treaty and can rule in disputes between energy being the driving force behind the Eur- member states and the Commission as well as asian Union. This would be a repetition of Eu-

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The Eurasian Economic Commission to existence on 1 Jan 2012 as the supranational governing body of the ECU.

ropean integration, given the fact that energy, in Traditionally, the export market of Russia lay to the form of coal, was the co-driving force behind the west of its borders and this is still true giv- the European Coal and Steel Community estab- en the fact that a third of Europe’s natural gas lished in 1952. and oil is supplied by Russia26. Over the past few years, however, it has been the East Asian mar- The rationale underlying the energy assertion kets that have attracted Moscow’s attention. It stems from the fact that Russia is a global energy can be asserted that the present is simply a con- supplier. It should be remembered that energy tinuation of the past, whereby the energy sector has always played a very significant role in Rus- remains a very important factor in strengthening sia’s external relations. During the Khrushchev and stabilising Russia. Given the fact that energy era, the energy sector in the Soviet Union had be- revenues make up half of the national budget, come the mainstay upon which the States’ politi- Goodrich and Mark note that «the Kremlin has cal economic and military strength relied upon.23 designated energy security as the primary issue In the 1950s, oil export revenues accounted for for Russia’s national security, especially since re- half of total Soviet export earnings.24 Currently, cent changes in global and domestic trends have in terms of reserves, Russia possesses the largest cast doubts on the energy sector is continuing proven reserves of natural gas in the world and strength»27. depending on which source to trust, is either the world’s top or second most oil producer behind, It should not be forgotten that it is the energy or in front of, Saudi Arabia.25 sector which has pushed forward the frontiers of

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industrialisation in Russia and helped create do- European market for Russian oil and gas.31 Hav- mestic stability. Moreover, energy has also been ing said this however, such a plan of diversifica- used as a lever in external relations. At times tion also requires very deep pockets. To illus- prices have been subsidised towards friendlier trate the point, the cost of the Altai gas pipeline governments and friendly countries that are part project between Russia and China which was of the energy distribution infrastructure, at other discussed at the Energy Dialogue in Moscow in times prices have been raised for countries such December 2012, is thought to be $14 billion32, as Ukraine, that have not seen eye to eye with whereas the cost of the proposed Eastern Sibe- 28 Russia. ria-Pacific Ocean oil pipeline is estimated to be $15 billion.33 Russia has benefited from high energy prices over the last decade and while it is a fact that External Support for the Eurasian Union major international crises and instability tend to increase energy prices, it would not be ra- The success of all integration schemes can be tional for Moscow to consistently rely on high measured through two means. Firstly the level energy prices to finance the domestic economy. of support in the existing member states and Despite the fact that established and projected secondly, the level of attraction in neighbouring new distribution measures have been completed states. It is quite challenging to obtain reliable or started, namely the North Stream29 and the information regarding Kazakh, Russian and Be- South Stream30 gas pipeline projects, Europe lorussian views concerning the Eurasian Union. alone cannot be contemplated as the sole cus- One fact that is noticeable, however, is the ab- tomer of Russian energy. No natural resources exporter prefers to have a client which resembles sence of any noticeable dissent or opposition to a monopsony, with the implication being the this integration scheme. It is far easier to gauge price of the resource being lowered to near the the popularity of the Eurasian Union with regard cost of production. to the interest it has aroused in its surrounding region. Just as energy poor countries desire to diversify their choices from where to import, the reverse Russia being the main dynamo behind Eurasian is equally true of exporters, who also prefer to integration, invited all the CIS states to join the diversify their markets. This is a lesson that has Eurasian Union. The countries that have so far been taken on board by Moscow which has been expressed an interest are not to the west of Rus- focusing on the growing East Asian energy mar- sia, but to its south-east. As its name signifies, kets. Diversification of the Russian export port- this integration project involves not only Euro- folio is a logical step to take, especially when pean countries, but also Asian ones that formed considering the continuation of a diminishing the ancient Silk Road.

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Opposing: Uzbekistan and Turkmenistan Supporting: Kyrgyzstan and Tajikistan

Uzbekistan and Turkmenistan do not contem- The Eurasian Union is certainly high on the agen- plate joining, with Dugin acknowledging that da of Kyrgyzstan and Tajikistan, both of which, both of these countries are firmly opposed to according to World Bank reports would benefit the integration process.34 The Uzbeks are con- in the short run through accession.41 Both coun- cerned about the direction the Eurasian Union tries may well be poor economically, but they are would take; possibly entailing deeper political giants in terms of hydropower. Given the fact integration. Turkmenistan on the other hand, that they are the most enthusiastic supporters of remains committed to its policy of neutrality, Eurasian integration within the post-Soviet area, maintaining an arm’s length distance towards all energy is once more pushed to the forefront of regional organisations. Furthermore, Turkmeni- the Eurasian Union, especially when one bears stan is very different compared to Kyrgyzstan in mind the fact that both Kazakhstan and Rus- and Tajikistan given the fact that it has proven sia are well endowed in terms of hydrocarbon and probable reserves of slightly more than half resources. In fact, Russia and Kazakhstan have the size of Russia in terms of natural gas, with reaped generous benefits from high energy pric- the south of the country being identified as pos- es and given the fact that oil is reaching $120 a 35 sessing the second largest gas field in the world. barrel presently, the prospects for large profits Turkmenistan, sharing Russia’s concerns of a from energy exports seem almost guaranteed. drop in European demand, joined Russia in con- centrating its efforts on attracting China as an A particular energy project that would benefit ever hungry customer. from the enlargement of the Eurasian Union is the CASA 1000 proposal.42 The neighbouring In terms of export routes to China, the Turk- countries of Afghanistan, India and Pakistan menistan-China pipeline heads the list. This are all in need of importing greater amounts of consists of two lines, the first of which was com- electricity. But for India especially, while Central missioned in December 2009, the second a year Asian electricity is very attractive, it is simply later.36 The third line is due to be completed in too far away, therefore, the cost becomes a vi- two years time. The pipeline starting in Turk- tal obstacle. It has been estimated that Tajikistan menistan crosses Uzbek territory for more than 500 km before travelling close to 1400 km on alone could produce 527 billion kWh per year Kazakh territory.37 This pipeline is forecast to from its natural hydropower potential - which 43 expand further with capacity being added in Ka- still remains significantly underutilised. The zakhstan. expectation is that even in the next two years the total hydroelectricity production of Tajikistan 44 Kazakhstan’s energy relations with China relat- will only reach around 26 billion kWh. Kyrgyz- ing to pipeline and gas exports began in earnest stan in this respect is also very important as it in the 2000s and were supplemented in 2011 possesses the third largest hydropower potential with a new cooperation agreement concerning in the post-Soviet Republics. Kyrgyz electricity oil and gas signed by both presidents.38 Com- exports are expected to more than quadruple in pared to Turkmen-Chinese energy relations, the the next eight years to close to 7 billion kWh in Kazakh agreements have not been implemented 2020.45 as quickly and in some cases, not been imple- mented at all.39 During the 2012 SCO summit The Vitality of Energy it was reported that another pipeline initiating from Turkmenistan, cutting through Afghani- Related to this Southwest Asian - Central Asian stan and Tajikistan before entering China was energy cooperation should be added the pro- reported in the Chinese press.40 This was indica- posed TAPI pipeline project.46 The central idea tive of the fact that China has alternatives to im- underlining this is to transport Turkmen natu- porting Kazakh gas. ral gas via Afghanistan and Pakistan to India. As

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mentioned Pakistan and India as well as Afghan- Eurasian integration process».49 So far the Ka- istan are all energy poor countries clamouring to zakhs have boarded the Eurasian express, whilst diversify their energy imports. The construction the Ukrainians have yet to state openly their re- of such a gas pipeline would enable Turkmeni- jection. stan to diversify its export routes, Afghanistan and Pakistan to benefit from cheaper gas im- Future Projections ports, as well as transit fees and finally India also gaining from increasing its level of energy secu- A union which is so diverse as to potentially in- rity. Therefore, an expanding Eurasian Union clude parts of two vast continents cannot be fully potentially offers greater opportunities for ex- assembled in a short time period. In this respect, porting energy as well as maintaining energy se- there are two factors that are necessary for such curity. a construction: genuine political will as well as economic sense. In order for the Eurasian Union Within this context, when states possess a choice, to be successful - perhaps even becoming a ri- they are tempted more by appeals to emulate val to the European Union - the “four freedoms”, others’ successes, than joining ventures that offer namely the free movement of persons, services, a limited economic outlook. Thus, the challenge goods and capital as well as the rule of law have facing the prospect of the Eurasian Union is to to be firmly established. The institutions that make it attractive to other states. Pursuing this have been created must also perform as intended trail of thought, the country President Putin has and endure the test of time. in mind borders the European Union: Ukraine - Russia’s relations with which has had its ups as To sum up, President Putin’s Eurasia idea is of well as downs, primarily related to energy.47 a metaphorical fast train. Without a doubt this is an express train with few stations. If the Cus- What would be a feather in the cap of the Eur- toms Union proceeds and develops as forecast, asian Union idea is for Ukraine opting to become then the final destination of Eurasian Union will a member of this integration scheme at the ex- be reached. The question remains what kind of pense of the European Union. So far, however, an outpost that will be. Will it resemble more Kiev has been hesitant about jumping on board the magnetic European Union in terms of demo- the Eurasian express, preferring to maintain its cratic institutions and pooled sovereignty, or will European vocation. This has been most unwel- it look more similar to the rather stale and inef- come for President Putin. ficient Commonwealth of Independent States?

In this respect, for integration to be a success, When investigating the potential impact of such neo-Eurasianism makes clear that «it is enough a development, the realisation of another but dif- to gain the support of Kazakhstan and Ukraine ferent EU - this time Eurasian, and not Europe- to succeed in the creation of the Eurasian union. an – may add further capabilities to the Russian The Moscow-Astana-Kiev geopolitical triangle Federation. Accepting the sayings of Heraclitus is a frame able to guarantee the stability of the - that change is the only constant in life - as times Eurasian union, which is why negotiations with have changed, so can states and institutions. Kiev are urgent».48 Enhanced Smart Power Capability The strategic and economic relevance of Belarus is relegated to below Ukraine and Kazakhstan The Cold War is over. Military forces do not as Dugin believes «the domination of Moscow- have the impact in terms of fear that they once Minsk axis will harm integration with Ukraine caused. The preferred weapons of today are not and Kazakhstan, which is why integration with the hard power of missile launchers and aircraft Belarus must proceed fluently without any sud- carriers, but the soft power of values, success- den incidents-along with other vectors of the ful role-models and culture. As Nye has offered,

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what states need to focus on is ‘smart power’ the coercion and payment. Soft power is the ability “combination of hard and soft power to create to obtain preferred outcomes through attrac- optimal strategies in particular contexts”50. tion. If a state can set the agenda for others or shape their preferences, it can save a lot on car- Nye developed this concept a decade ago to rots and sticks. But rarely can it totally replace counter the misperception that soft power alone either. Thus they need for smart strategies that could produce effective foreign policy.51 He fore- combine the tools of both hard and soft power”.52 saw that “Power is one’s ability to affect the be- If one accepts the premise that all states engage haviour of others to get what one wants. There in and aspire to increase their power, then the are three basic ways to do this: coercion, pay- realisation of a fully fledged Eurasian Union is ment, and attraction. Hard power is the use of more than likely to add to Russia’s smart power.

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