Andreas Knaul has more than 25 years of professional experience as a lawyer in Russia, Ukraine, and Central Asia. He is Managing Partner at Rödl & Partner in Russia and Kazakhstan and provides legal and consulting services to foreign companies doing business in Russia and Ukraine. He also teaches European law, in particular competition law, at a number of universities and has experience working for the European Commission.
After his recent contributions to the DOC Rhodes Forum on the changes in world order seen from a business perspective, the DOC had some further questions about the Eurasian Economic Union and the Belt and Road Initiative.
Dialogue of Civilizations Research Institute (DOC): The Eurasian Economic Union (EAEU) has received less attention in popular Western media than China’s Belt and Road Initiative (BRI). What are the differences between the two initiatives?
Andreas Knaul: In 2013, China officially unveiled the Belt and Road Initiative (BRI). Within a short period of time since then, China has developed a well-funded global investment plan concerning investments in various kinds of infrastructure. Consequently, the project has captured attention in Western media. The focus at first was on Central Asia, followed by countries such as Indonesia and even countries from South America showing their interest. Thus, the project started to become global.
The Eurasian Economic Union (EAEU), the union of the five states in north-eastern Eurasia, consisting of Russia, Belarus, Kazakhstan, Kyrgyzstan, and Armenia, is comparable to the beginnings of the EU in its pursuit of economic interests.
Firstly, the merger of the EAEU is primarily an economic union. It serves to ensure the exchange of goods, capital and services between member countries. The Eurasian Economic Union has its origins in 1999 when Russia and Belarus signed an agreement to establish a union between the countries. In 2000, Kazakhstan, Tajikistan, and Kyrgyzstan furthered progress towards the project by signing up to the Eurasian Economic Community alongside Russia and Belarus. In 2015, the EAEU established its first trade agreement focusing on the market in Central Asia. The union today includes a population of over 182 million people.
In 2015, the year the EAEU formally came into being, metals and hydrocarbons suffered price erosion. In particular, export sales in Russia and Kazakhstan receded. Moreover, the Ruble suffered devaluation. These developments influenced the beginning of the union. The EAEU supports economic growth in all member states. Currently there are several digital initiatives being carried out by the Eurasian Economic Commission – the executive body of the union – covering various sectors. There are steps towards a joint data exchange, a common electricity market and service, and a Common Customs Code.
DOC: How much impact has EAEU membership made for its initial members (Belarus, Kazakhstan, and Russia)?
AK: The situations of the member states are very different and the influence of EAEU membership can only be considered in a differentiated way.
Kazakhstan has been a middle-income country since 2014. Its economic growth is forecast to continue at a rate of 3% per year. The country is an important transit corridor between China and Russia. Standardising transit fees will make it easier for Kazakhstan to benefit from its geographical location and at the same time increase competitive pressure. During recent years, reforms have reduced bureaucracy and corruption has been minimised. This has stimulated the economy.
Kazakhstan and Russia maintain a close economic relationship within the Eurasian Economic Union, which has a positive effect on the stability of the Kazakh currency.
The country is improving its infrastructure, for example by building logistics centres. Infrastructure is partly being expanded through funds from China. Generally speaking, Kazakhstan intends to develop even closer cooperation with China.
With the ‘Kazakhstan 2050’ project, Kazakhstan has set itself a goal of reducing its debt, realigning its energy supply, and modernising and diversifying the economy.
A public survey in 2015 underlined that in Kazakhstan, an overwhelming 80% of the population support EAEU membership.
Russia, due to EU and US sanctions triggered by the conflict in Ukraine, has turned to an increased focus on Asian relations. Russia’s development is very important for the EAEU. Russia generates 80% of the GDP of the EAEU and has nearly 80% of its population. A public poll conducted in 2015 clarified that 78% of Russia’s inhabitants support the EAEU.
The economy in Belarus is highly dependent on Russia. One of the benefits of EAEU membership is Russian gas and oil supply. Through the re-export of oil and oil products from Russia, Belorussian GDP has risen more than 10%. A 2015 public survey conducted in Belarus showed that about 60% support EAEU membership, which astonishingly is much less than in Russia or Kazakhstan.
DOC: Should EAEU members view participation in the BRI as equally beneficial?
AK: For EAEU members, the attraction of participating in the BRI lies in the opportunity to improve transport and logistics infrastructure and to strengthen trans-border industrial cooperation. Implementing BRI infrastructure projects in EAEU countries is an important motor for growth and socioeconomic development amongst EAEU countries. The EAEU sees alignment with the BRI as a major goal.
The Central Asian market is growing, especially in agriculture, mining, and industry. Trade agreements have help to develop export markets. The European Union also wants to promote developments with respect to Central Asia and in 2019 decided on a Central Asia strategy to intensify cooperation.
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