09:17

17.10.14

8 min.

Rising Eastern Empire: The Eurasian Union

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Rising Eastern Empire: The Eurasian Union

You shouldn't get fooled by the news in the mainstream media giving you a wrong impression of a weak and sanctions-hit Russia. News like how Russia's rouble has hit an all time low against the dollar and President Obama's misleading statements how Russia is „not producing anything"are just to give a false sense of security and supremacy to the West.


Yet the reality is quite different: Moscow is forging two rising alliances which are about to shake the very basics of the current EU-US hegemony. These two upcoming giants you should watch out for are the Eurasian Economic Union and Russia's new „best friends forever" alliance with China.


 


EURASIAN UNION: THE EAST'S EU


Imagine a new single economic market of 171 million people and a gross domestic product of USD 3 trillion, covering an area of over 20,000,000 square kilometers, thus approximately 15% of the world's land surface. Now open your eyes and look on the map of the Eurasian Economic Union, which silently – and definately neglected by the mainstream media - became a reality between Russia, Kazahstan and Belarus. While the Western world was rejoycing about how Putin's economy will crack under the sanctions imposed upon it for its actions in Ukraine, the master of the Kreml has been one step ahead by re-opening Russia's doors to the East instead of desperately trying to knock on the closing doors to the West.


The Eurasian Economic Union has all the potential to become a true economic powerhouse.The three countries represent a market of a combined GDP of around USD 2.3 trillion. Russia has the 8th largest economy in the world by nominal GDP and the 6th largest by purchasing power parity, not to mention the Russian billionaires who are present everywhere. Russia is known for its extensive mineral and energy resources, the largest reserves in the world, making it the world's largest producer of oil and natural gas. Since the turn of the century, Eurasian Economic Union member states have experienced an economic growth averaging 6% to 8% growth between 2000 and 2007,and even higher after the financial crisis. Just for comparison, the GDP growth in the NAFTA consisting of the US, Canada and Mexico averaged half of that for the period, with even lower figures for Europe.


Since the establishment of the Eurasian Customs Union in 2010, trade between member states rose sharply to USD 63.1 billion in 2011, which represented a 33.9% year -on-year growth. In 2012, mutual trade amounted to USD 67.9 billion and the US and EU sanctions against Russia will further boost these numbers.


EVERYBODY WANTS TO JOIN


Russia is the first of the three countries to have finally ratified the treaty this week, which clearly shows that Moscow is wanting to take the lead in the union. Russian President Vladimir Putin on Friday signed a law on the ratification of the treaty, concluded in Astana on May 29. The document envisages creation in ten years' time of a new association under common economic control - the next phase after the Customs Union and the Common Economic Space. The landmark treaty, which lays the foundation for creating the ambitious regional integration project seen to deal a serious blow to the West's plans to preserve the unipolar world, was ratified by Russia's lower house of parliament, the State Duma, earlier on Friday. The Union will officially go into effect on 1 January 2015, assuming the treaty is approved by the parliaments of the three countries.


Often seen as an artefact of Vladimir Putin's nostalgia for the Soviet Union, the Eurasian Union has been largely ignored in the West. Commentators argue that the alliance is still just a daydream and that it will be eaten up by internal conflicts, such as the fears by smaller ex-Soviet members that Russia would want to dominate them. Yet what those commentators are missing is that in in today's world of free trade blocks those resourceful states also feel the need to integrate – and as no one else seems to be wanting them. EEU membership is the only viable way to protect themselves against the other single markets. Perhhaps with a bitter taste in their mouths they will still join in because membership gives them access to a large market, low prices of gas, an opportunity to get direct budget support from Russia and a favourable labour migration regime in the world of preferential trade settlements such as the EU, NAFTA, BRICS and many others.


As part of the former Soviet Union, Belarus had a relatively well developed industrial base. The country also has a broad agricultural base and a high education level. Among the former republics of the Soviet Union, it had one of the highest standards of living.


The economy of Kazahstan is the largest economy in Central Asia. It possesses enormous oil reserves as well as minerals and metals. It also has considerable agricultural potential with its vast steppe lands accommodating both livestock and grain production, as well as developed space infrastructure, which took over all launches to the Internatioanal Space Station from the Space Shuttle.


Along the pressure to integrate into free trade blocs, there are also at least two new willing members who would be keen to join this new Eastern dream. The republics of Armenia and Kyrgyzstan were among the first to express their interest in becoming a member of the organization and plan to take the necessary steps to do so by the end of 2014. Perhaps you don't know too much about those countries (why would you?) but nder the old Soviet central planning system, Armenia had developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to sister republics in exchange for raw materials and energy. Kyrgyzstan, on its part, is a mountainous country with a dominant agricultural sector. So the plan goes as follows: Russia provides the raw materials, Kazahstan and Kyrgyzstan are the food baskets with Belarus and Armenia being responsible for the fine mechanics.


Ukraine has also submitted an application to participate in the Eurasian Economic Union as an observer in August 2013.Its membership was seen by some analysts as the key to the success of the union as Ukraine has the second largest economy of any of the 15 former republics of the Soviet Union. Keeping that in mind, the current battle between the East and the West for Ukraine's soul is no coincidence. Russian pressure for Ukraine to join the Eurasian Economic Union instead of the EU was a key factor in the Euromaidan protests and the follow-up events that led to the Crimean Crisis and the current civil war. With Kiev leaning towards the EU – especially following a substantial amount of aid and a fastforward process to join Brussels - the future inclusion of Ukraine in the EEU seems unlikely for now. Unlikely but not impossible: Germany's Angela Merkel has said Ukraine is free to "go to" Russia's "Eurasian Union", amid signs of a new willingness to make peace with Russia.


INTERNATIONAL RESPONSE



The international response to the rising Eurasian Union has been cynical in rethoric yet precautionary in actions. Many commentators compared it to the BRICS (consisting Brazil, Russia, India, China, South Africa) which has been largely a talk-shop up until recently. BRICS is now also gaining momentum as it openly started to challenge the Western hegemony by agreeing on the creation of a lending alternative to the US-dominated World Bank. However, unlike the vastly diverse BRICS, the EEU will be probably faster in making a true difference in the international political arena as it is teritorially integrated and consists of countries with similar post-Soviet heavy industrial and agricultural background, related language and cultural backgrounds and shared interests.
Western analysts generally see the Eurasian Economic Union as Putin's way to reunite many of the former Soviet republics. Hillary Clinton expressed her opposition to the Eurasian Union, claiming it is "an attempt" to re-establish a USSR-type union among the former Soviet republics.[In December 2012, the former Secretary of State warned that "It's not going to be called that [Soviet Union]. It's going to be called customs union, it will be called the Eurasian Union and all of that, but let's make no mistake about it. We know what the goal is and we are trying to figure out effective ways to slow down or prevent it".


Yet on the level of actions growing concern in the EU of the Eurasian Economic Union has also made the EU accelerate its integration process and economic support towards post-Soviet states. Latvia quickly adopted the euró on 1 January 2014. Lithuania plans to enter the eurozone as well starting 1 January 2015, the day the Eurasian Economic Union comes into force. During the Crimean crisis, global media was flooded by reports by how these countries allegedly trembled from being invaded by Russia, which was also an opportunity for the West to ensure those post-Soviet states of its support against a threat which hardly ever existed. The EU has also signed free trade agreements with Moldova and Georgia in an effort to slow the expansion of the Eurasian Economic Union. Some member states of the EU have sought to find alternatives to Russian gas, while others have voiced their support for Russia's South Stream – which eventually got boycotted by Brussels.


Perhaps the best indicator about the importance of the new rising Eastern power bloc is the hasty re-start of the EU – US free trade negotiations. Also, leaked documents revealed that Europe - which is still largely dependent on Russian gas - is asking the US for gas. While Europe was busy rejoycing about the freezing of Gazprom's South Stream, Russia signed a mega-deal with China about the world's largest fuel network. Thus. we are witnessing a major restructuring in the global power balance with two new axes: Russian gas dependent Europe turning to the US for its shale gas and Moscow teaming up with Bejing in a record USD 70 billion pipeline projet instead of being too preoccupied with pleasing its Western gas consumers.


Russia and China, as as two allying Eastern giants, are clearly redrawing the world's energy map. This new Russian Chinese friendship and the effects of the 3,968 km pipeline on the global energy map and Washington's hegemony through the petro dollar will be the topic of the next part of this analysis.



Jim Gold · 21:50 · 08.11.2014
Very true I see nothing but promise in Russia's economic future. Who wouldn't envy .5 percent GDP growth? And that deal with China selling them oil at below market rates was a triumph. Getting rid of other potential customers puts you a better bargaining situation as a seller. The less the China pays for a barrel of oil the more money Russia will make. That's how economics works right? One thing is clear though with allies like Belerous and Kazakastan the Western world should be shaking in their collective boots. In Russia success is measured by how well the government helps their people diet and lose weight. The Russian people are heading for great success under Putin!
User · 21:16 · 28.10.2014
Wow! There is nothing about this topic in anywhere else in the media!
User · 21:14 · 28.10.2014
Thanks for the article! It puts the recent events in a larger scale!
User · 21:13 · 28.10.2014
Thanks for the article! It puts the recent events a larger scale!
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