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Iran, Eurasian Economic Union, and the World’s Politics

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By Agha Iqrar Haroon

Agha Iqrar Haroon is a Development Observer working in Central Asia, South Asia, and Eastern Europe regions

The Eurasian Economic Union (EAEU) is flashing in international news after Iran indicated that it would like to become a full member of the EAEU (can be read as EEU also).

 

Although the Office of Chairman of the Board of Eurasian Economic Commission said that no official request from Iran has been received for full membership but shockwaves of this news can be felt in Middle Eastern, Israeli and NATO allied media and the serious US Think Tanks like Jamestown Foundation have reacted sharply. A number of newspapers of the GCC countries have indicated that such development would create bitterness among the EAEU states and the GCC states.

Why do the European Union (EU) and the NATO-allied countries take this news as a threat? It’s a question that requires an info about what the EAEU is actually?

Trade turnover between Iran and the EAEU has already been increased by 2 percent, exceeding $2 billion, despite the COVID-19 pandemic in the year 2020

The EAEU covers an integrated market of 180 million people with a combined gross domestic product of more than $5 trillion. It encourages the free movement of goods and services and can formulate common policy in key areas such as energy, agriculture, transport, customs, and foreign trade and investment. Therefore, this platform can mitigate the western blockade to the Iranian economy.

Iran had a free trade agreement with the Eurasian Union since 2018 but this agreement would come into force now and trade turnover between Iran and the EAEU has already been increased by 2 percent, exceeding $2 billion despite the COVID-19 pandemic in the year 2020. Food products and agricultural raw materials accounted for most of that trade in both directions: 80 percent of the goods that the EAEU supplied to Iran and 68 percent of those sent the other way. Joining the union would improve Iran’s economic and political position globally and help to offset, at least partly, the cost of US sanctions.

Dr. Suvi Kansikas of the University of Helsinki believes that the initiative should be analysed in its geopolitical context because Russia wants to offer the countries of the former Soviet Union (FSU) an alternative integration model.

Another news in Eastern European media indicates that the Eurasian Economic Union will consider Uzbekistan’s proposal to build the Trans-Afghan Railway by joint efforts.

It must be noted that measures for the development of transport and logistics infrastructure have been included in the strategy 2025 and the volume of rail transit through the EAEU states from Asia to Europe and back increased by more than 60% in the year 2020. This shows that cooperation in this area holds great promise. For the EAEU and Uzbekistan, such a project can improve the competitiveness of enterprises and the efficiency of trade between Central Asia and eastern Europe. One should remember that Uzbekistan is an Observer State of the EAEU.

Political gains of EAEU

The German Foreign Affairs expert Uwe Halbach in his academic paper titled “Vladimir Putin’s Eurasian Union –A New Integration Project for the CIS Region?” says that the Eurasian Union is primarily an economic project accompanied by the Russian efforts towards integration within security policy areas—–mostly from the former Soviet Union.

One should remember that the then Russian Prime Minister Vladimir Putin in 2012 announced a “Eurasian Union” as the target of an amplified integration process within the CIS region. The original idea came from the former President of Kazakhstan Nursultan Nazirobve.

The NATO allies look at this initiative as a Russian military presence and an extension bordering NATO-allied former States of the USSR while Russia calls it just an integration project.

Dr. Suvi Kansikas of the University of Helsinki believes that the initiative should be analyzed in its geopolitical context because Russia wants to offer the countries of the former Soviet Union (FSU) an alternative integration model.

Eurasian Economic Union is seen as an energy superpower, producing about 20.7% of the world’s natural gas, and 14.6% of the world’s oil and gas market, making it the world’s top producer in both domains. It also produces 9% of the world’s electrical energy and 5.9% of the world’s coal, making it the third and fourth producer in the world

Suvi further says that Russia seeks to attract new members away from the EU orbit with the integration projects. Its integration policy is based on counter-effecting the EU’s attraction and that is why it has regarded the Eastern Partnership as a challenge to its interests in the FSU area. The EU’s stated objective in the European Neighbourhood Policy was to share the EU’s stability, security, and prosperity with neighbouring countries. The policy was designed to prevent the emergence of new dividing lines in Europe by offering neighbouring countries closer political, security, economic and cultural cooperation. However, Russia has regarded the policy as a threat to its security and believes that the EU is trying to establish its own sphere of influence through the European Neighbourhood Policy and then later the Eastern Partnership. After Geneva Accord, the EU wanted the Eastern European countries to join their own integration projects although Accord promised that US-allied countries would not mingle in with former Soviet states.

The diplomatic magnetic field created by the EU has polarized the situation for all countries between Moscow and Brussels and the prime example is Ukraine’s situation—the victim of EU promises and Russian realities in the region.

The problems for these countries are caused by the difficult relationship between the two power centres and their unwillingness, or at least incapability, to deal with one another. Moreover, the Ukrainian scene of Crimean annexation and war in the Donbas region indicated that EU miserably failed to protect like-minded and pro-EU countries, sending a wave of shock and fear all over former USSR independent states.

Is Economic Integration really the foremost agenda of EAEU?

Economic integration has been one of the major foreign policy goals of President Vladimir Putin. It was built on the already existing Eurasian Customs Union (ECU), as the presidents of Belarus, Kazakhstan and Russia signed the treaty founding the EEU/EAEU. The signing ceremony was held on May 29, 2014, and the organization started operating in January 2015 with three founding member states. Armenia joined a few months behind. The founding document established the international legal status, organisational framework, goals, and operating mechanisms of the Union. The EEU will base its executive body in Moscow, the high court in Minsk, and the top financial regulator in Astana. It seeks to provide closer economic integration between the member states who, signing the treaty, undertook obligations to guarantee the free movement of goods, services, capitals, and labour. There will be an 11-year-long transition period during which the member states aim to set up a common oil and gas market.

The Eurasian Economic Union is seen as an energy superpower, producing about 20.7% of the world’s natural gas, and 14.6% of the world’s oil and gas market, making it the world’s top producer in both domains. It also produces 9% of the world’s electrical energy and 5.9% of the world’s coal, making it the third and fourth producer in the world, respectively.

Background of Integration

The Eurasian Economic Community (EurAsEC) was founded in the year 2000 to shore up a common market and the Eurasian Customs Union subsequently came into existence on January 1, 2010. In October 2011, the Russian President Vladimir Putin announced his plan to create a Eurasian. The former Kazakh President of Kazakhstan Nursultan Nazarbayev first mentioned the idea of creating a union in Central Asia during a speech given at the Moscow State University in May 1994. On November 18, 2011, the Presidents of Belarus, Kazakhstan, and Russia signed an agreement setting a landmark goal of establishing the Eurasian Union by 2015. A single market with established on January 1, 2012, and the Eurasian Economic Union (EEAU) was eventually established on January 1, 2015.

On the net, all EEAU member states project that their benefits outweigh the risks in terms of improvements to their living conditions. Although the establishment of the EEAU is ongoing, the EEAU theoretically provides an economic space in which movement of goods, services, capital, and labor are free, positive-sum benefits are distributed to all members, economic and monetary policies are harmonized. A Customs Union is now viewed as a springboard for the subsequent transition to more intensive forms of regional integration.

The factors that will push this region into success include common technological targets, common infrastructure, and common development systems. For example, structural homogeneity will drive integration because the countries share similar objectives. Consider the fact that the nuclear energy sectors of Kazakhstan and Russia are linked through the mining and enriching process and are also linked through engineering projects and pharmaceuticals. Similarly, Russia and Belarus are linked through military equipment development and railway car engineering while Belarus and Kazakhstan are linked through real-tank construction.

Linkages, Connectivity and Trade

After the collapse of the Soviet Union, one of the biggest railway and road networks on earth dilapidated due to lack of funds, interest, and political ownership but the EEAU created new interests in the region for transport, connectivity, and trade and now almost all once-abandoned railway tracks are operational. Since the major economic centres of the EEAU are Moscow, Minsk and Astana; therefore, all three countries worked together for networking for trade integration. The railway tracks between Moscow and Minsk are 717 kilometers, and the distance between Moscow and Astana is 2,700 kilometers, making infrastructure a key opportunity for the integration of member states. Major infrastructure projects began during the 2000s in order to modernize and connect the regional bloc to other markets, facilitating both integration and trade in the region. In 2007, Moscow announced an investment of US$ 1 trillion to modernize Russian rail and road network. It may be mentioned that a large number of railway track is now being used by Chinese cargo operations under Belt and Road initiative to send Chinese goods to European markets via Kazakhstan and Russia.

Railways have been the primary way of linking countries in the Eurasian Economic Union since the 19th century. It has always been the main way of transport in the Russian Empire and the Soviet Union up until today. The union ranks 2nd in the world in terms of railway trackage (about 7.8% of the world’s share). However, it is still looking to improve cross-border trade within the union.

Even under COVID-19 trade volume among member states was not bad enough although faced a decline during 2019.

Iran, Eurasian Economic Union, and the World’s Politics
Iran, Eurasian Economic Union, and the World’s Politics

According to Statista.com data for the year 20201, the trade volume of member states peaked in 2014 when it amounted to almost US$ 939 billion, seeing a sharp decrease between 2014 and 2015 when international sanctions were imposed against Russia but again jumped to US$ 736 billion in the year 2016.

It is too early to say whether Iran will get full membership or not but one point is certain that the US allies and the NATO members react very sharply with his “Unconfirmed Report”, indicating that the Eurasian Economic Union has become a real economic and geopolitical threat to the western economic system like Belt and Road Initiative (BRI) and China Pakistan Economic Corridor (CPEC).

Central Desk
Central News Desk.

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