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Problems and Prospects of the Eurasian Economic Union

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Problems and Prospects of the Eurasian Economic Union Świat Idei i Polityki Seilbek Mussatayev, Assem Kaidarova, Maigul Mekebaeva Problems and prospects of the Eurasian Economic Union: SWOT analysis Abstract: In this article the authors examine the impact of integra- tion processes on the competitiveness of national economies of the participating countries of the Eurasian Economic Union (EAEC). Any integration, including integration within the EAEC affects the economy of participants in two ways: on the one hand it favorably promotes mul- tilateral mutually beneficial business contacts, and on the other hand, it feels the strength, competing with each other, the individual national economies. The authors comprehensively investigated the current situ- ation and problems of the EAEC with the use of different methods of political analysis (comparative and system analysis, content analysis, event analysis, SWOT-analysis, and others.). In a sufficiently sharp polemical form, based on credible evidence materials, the article shows not only the integration of interaction, but also features of competition within the EAEC, the causes of conflict, as well as the consequences that resulted in the devaluation of ruble and dumping prices in Russia, which in turn all have a negative impact on competitiveness of the economies of Kazakhstan and Belarus. Key words: integration, union, regional economic integration, national economy, Customs Union. S. Mussatayev, A. Kaidarova, M. Mekebaeva: Problems and prospects 195 Introduction The Eurasian Economic Union (hereinafter the EEU) is an interna- tional organization for regional economic integration. Its member states are: Kazakhstan, Russia, Belarus, and Armenia. According to the Article 1 of the “Treaty on the Eurasian Economic Union” of May 29, 2014 (signed in Astana, Kazakhstan), the EEU is “an international organization for regional economic integration, shall posses international legal personality, introduce the free movement of goods, capital, services and workforce, a coordinated, coherent and unified policy in the fields of economy defined in this Treaty and international agreements within the Union”1. The idea of integration in Eurasion was announced by Nursultan Nazarbayev at Lomonosov Moscow State University in 1994. The initiative of the President of Kazakhstan was implemented in pha- ses: in 2000, Treaty on the Establishment of the Eurasian Economic Union (EEUC) was signed; since 2010 the Customs Union (CU) has been operating; and from 2012, Kazakhstan, Russia, and Belarus have moved to the third stage of the integration construction – the Single Economic Space (SES) was established. In 2014, the afore- mentioned Treaty for the establishment of the EEU was signed, and came into force on 1 January, 2015. The EEU is gradually expanding. Kyrgyzstan was to be a full member of the Eurasian Union on 29 May, 2015. The Government of Tajikistan expressed interest to join the EEU and stated that it reviews the possible consequences for the country’s economy if the decision is made. Prospects and possibilities of the EEU extension are not limited to these countries. As it known, on October 24, 2013, at a meeting of the Supreme Eurasian Economic Council in Minsk (Belarus,) the President of Kazakhstan, Nursultan Nazarbayev, said that Abdullah Gul, President of Turkey, had requested him to join 1 „Договор о Евразийском экономическом союзе” от 29.05.2014, https://docs. eaeunion.org/sites/storage0/Lists/Documents/a089f4c6 –02da-4461- b033– 3f5d122e0020/e57db9f2 – 9589 – 4b26-be1e-b1a43862c6ed_635375701 449140007.pdf, 2.10.2015. 196 S. Mussatayev, A. Kaidarova, M. Mekebaeva: Problems and prospects the Customs Union (the intermediate stage of the EEU). “Turkish President contacted me to ask whether Turkey could be a part of the Customs Union,” – said Nazarbayev. “Turkey is a large country, we have a common border. Wherever I go to the West I get asked whether we are creating another Soviet Union or something to be governed by Russia. And I had to explain that we do nothing of the kind. So if we admit Turkey maybe such questions stop,” – Nazar- bayev proposed it to the Presidents of Russia and Belarus2. The allies responded positively on this proposal. In turn, Russian President Vladimir Putin said that India also took the initiative of signing the agreement on free trade zone with the Customs Union’ countries: “Our big friend – the Prime Minister of India has just visited us. He asked me to raise this issue in our meeting today that India would like to consider the possibility to sign an agreement on free trade zone with the Customs Union, – Russian President was quoted by RIA Novosti. – I think that referring to the Indian market size, the prospects for the development of Asia as a whole, we need to take this suggestion seriously”3. If Turkey and India become the EEU Member States, then the or- ganization will play a key role in world`s politics and economics. The ultimate goal of the EEU is not an expansion, but full integration, modernization, cooperation, and competitiveness of national econo- mies, and the creation of conditions for sustainable development to improve the living standards of the Member States. However, the realities of integration within the EEU are not so promising. According to the experience of the European Union (EU), the economic gap between new and old members of the EU becomes more and more obvious. The GDP per capita of many EU member states have not reached even half the average index of the previous organization structure. Germany and France are considered to be the EU flagships, while the share of other members of the Union 2 Ю. Магер, Новые горизонты „Казахстанская правда” 25.10.2013, p. 2. 3 А. Дубнов, Таможенный союз: плюс – Турция, минус – Украина, Индия – в уме?, РИА Новости http://ria.ru/analytics/20131025/972555134.html#ixz- z3VkQdCc9Z, 25.10.2013. S. Mussatayev, A. Kaidarova, M. Mekebaeva: Problems and prospects 197 in the overall economy lags behind, and some countries still face a severe economic crisis. Economic indicators of European countries and some of the “young” EU member states are very different – the proportion is one in four. To bridge this gap is hardly possible, and this imbalance creates additional problems for the EU development. Such countries like Greece generally want to secede from the EU, blaming stringent requirements of the European Parliament and the European Commission’s budget savings of their problems. The en- dless financial and economic crisis, which has shaken the Eurozone for a decade, has become the problem number one in the entire EU as a whole, not only for individual member states. The shortsighted policy of the European Commission, which focused only on solving financial problems resulted in an aggravation of social problems that come from the local level to the supranational one and has taken threatening features. In such circumstances, the accession of new member countries into the European Union can easily result in con- flicts related to the funds reallocation. On the one hand, developed countries have resisted additional contributions to general funds. On the other hand, some countries (Spain, Ireland, and Portugal), want to continue to receive these funds. Similar economic problems and imbalances are observed within the EEU. To understand the current situation there is a need for the comparative political analysis of geographic, economic, and socio- -political indicators of the EEU member countries. The EEU member states, as in the EU, also vary significantly from each other in terms of economy, territory and population, natu- ral resources, the level of scientific, technological and industrial base, infrastructure, etc. For example, the area of Russia is 17,125,407 square kilometers, ranking first worldwide, with the population of 146,267,288 people, the 9th place in the world. The GDP nominal level – 2,097 trillion dollars, GDP per capita – 14,591 USD4. On the territory of the Russian Federation there are enormous reserves of raw materials and energy resources. In particular, there are 4 World Economic Outlook Database, 2014, http://www.imf.org/external/pubs/ ft/weo/2014/01/weodata/weorept, 2.10.2015. 198 S. Mussatayev, A. Kaidarova, M. Mekebaeva: Problems and prospects large deposits of oil, gas, coal, potash salts, nickel, tin, aluminum raw materials, tungsten, gold, platinum, asbestos, graphite, mica, and other minerals. Russia discovered more than 20,000 mineral deposits, all kinds of natural resources, almost the whole periodic table. According to the results of the 2011 geological surveys, the hydrocarbon reserves in Russia increased. According to preliminary data, oil reserves increased by 600 million tons, and gas at 900 billion cubic meters (CBM). Under the annual “Statistical Review of World Energy” by the BP (British Petroleum) oil company, by the end of 2013 Russia ranked the first in the world in natural gas reserves (44.8 trillion cubic meters), and in oil it was on the 8th place – 93030000000 barrels, being overtaken by a number of the Gulf countries and Venezuela. At the same time Russia is the leader in oil production, the second in gas production, after only the United States5. That is, the Russia’s main exports are oil and gas. Among the EEU members, the Russian Federation has the most powerful industrial potential, with thousands of factories of mechanical en- gineering, instrumentation, light industry, chemical, and food indu- stries. It has an access to the seas. The navy and military-industrial complex of Russia is among the strongest worldwide. The next EEU member is the Republic of Kazakhstan with the territory of 2 724 902 km². It ranks the 9th place in the world, but yet the population number is small – only 17 439 271 (it is the 63rd place in the world). The population density is 6,4 persons per 1 squ- are kilometer (the 184th place in the world.) The GDP is 224,415 billion US dollars (12 456 dollars per capita). Kazakhstan, as well as Russia, is also rich with minerals.
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