Eurasian Integration: Putin’s Futureless Project

Tracing back the routes of the latest Eurasian integration attempt proposed by Russia, we find economic synergy and growth promise as the cornerstone of Putin’s vision for the region.

Indeed, any integration, whether in Europe, Asia or in this case Eurasia in theory holds economic dividends as the first and most undeniable argument for closer ties and unification of economic capabilities. Thus, when calling for Commonwealth of Independent States (CIS) members

to come forward and join Russia, Moscow drew a picture of a prosperous new fellowship of nations that would aggregate wealth faster and more abundant that any state could hope for individually. The frontrunner of the Eurasian economic integration—the Customs Union, functioning since July 1st 2011 was supposed to be

a fine example of how Eurasian economic synergy works. Its success was supposed to trigger the rest of the doubting nations like Ukraine to join in.

From the very beginning Customs Union

of Russia, Belarus and Kazakhstan had a limited capacity for synergic effect. First of all, Russia’s GDP of $2,015 billion constitutes for 88.5% of cumulative Customs Union GDP and thus the addition of Belarus and Kazakhstan did not allow for creating a sizeable entity that could challenge or even be compared to world’s leading economies. Locked between EU (GDP $17 trillion) and China ($13.4 trillion), Customs Union could not have been a center of economic power by definition. Even when you consider the addition of Armenia, Kyrgyzstan and Tajikistan, Russia’s GDP receives no more than 17% increase and is a few hundred billion short of a German economy. And in the case of creating an economic center of attraction, size does matter.

Secondly, the structure of the economies, especially when comparing Russia and

Kazakhstan, are quite similar and both export oriented. Russia’s exports are 77% resource focused and in the case of Kazakhstan the numbers are even higher—91%. The customs regime liberalization that the Union implied did not affect countries export orientation and left only minor parts of the economy to be boosted by the new regulation rules. Obviously, it would have been unwise to predict a great gain in trade, when most of the economic capacities were focused on trade with third countries. That is why by the end of the Customs Union pilot year, Russian trade with Union members increased comparably to its gain in trade with the rest of the world: the overall gain of 31.2%, Kazakhstan—30.6% and Belarus— 37.7%. In 2012, Customs Union members represented only 7.7% of Russian trade, and in 2013

the numbers slightly dropped to 7.5%. In 2013, out of all CIS members Ukraine was still Russia’s primary trade partner accounting for 33% of CIS Russia’s trade, when Belarus represented 29%, Kazakhstan—25%; candidates to Customs Union inclusion Kyrgyzstan—2%, Armenia and Tajikistan both accounted for 1%. Despite the fact that Ukraine refused to join Customs Union, trade structure and orientation remained more or less the same as before the integration circa 2011.

As for now, the sole winner of the Customs Union trade liberalization is Belarus; its trade with Russia and Kazakhstan grew more than 10%, when Russia’s trade increased only by 0.5%.

Kazakhstan on the other hand received additional taxes, when several thousand Russian businesses reregistered in Kazakhstan, due to better legal and tax conditions.

Thirdly, the levels of economic development of the Eurasian nations vary quite drastically.

Russia’s GDP per capita is $14,037 which is almost equal to Kazakhstan’s, but more than twice the amount of Belarus, 4 times greater than in Armenia and more than 13 and 17 times greater in Kyrgyzstan and Tajikistan respectively. Such inequality does not pan out well for the inclusion of the latter two, which would undeniably call for considerable economic support, donations and subsidies. Considering that the positive economic effects of the inclusion of the Kyrgyzstan and Tajikistan may be evaluated as vain, there is no economic sense for Customs Union to expand southward.

Fourthly, the uneven size of the economies constitutes for a highly misbalanced regula tion system, in which Russia’s dominance and aggressive stance would only progress in time, as Russia’s economy loses firm stance and becomes depleted of financial resources that could be used to subside smaller partners. As of May 2014, Russia faces certain economic turbulence due to Western sanctions and exhaustion of the current economic paradigm. Despite the fact that the prices of oil and gas—main source of Russia’s financial growth in 2000s have been consistently high for the last 7 years, the economy had significantly slowed its growth to 0,5% (0,2% GDP growth according to IMF). Capital flow in the first quarter of 2014 exceeded $50 billion, and may reach $100 billion by the end of the year according to official prognosis by the Ministry of Finance. Russian private companies and corporations are facing complications of credit extension from western financial institutions. And the consumer demand—one of the last remaining sources of economic growth may plummet as the result of national currency devaluation, tax increases and negative economic expectations by the population.

Russia’s economic troubles are already affecting Customs Union trade. In the first quarter of 2014 it shrinked by 13%. In fact, Belarus and Kazakhstan mutual trade flow has increased by 12.8%, but as it accounts for only 1.5% of the overall Customs Union trade volume, it does not affect general tendency. Russia’s trade with Kazakhstan shows 13% decrease, with Belarus—7.3%.

The Social Limitation

Eurasian integration, whether Customs Union or proposed Eurasian Union face certain social limitation dictated by the Russian society. Growing xenophobia and religious and cultural differences that only expand in time are causing many complications for potential integration. The only problemfree state in this regard is Belarus, being the most culturally close, ethnically similar and historically being part of the Russian state longer than others. Originally part of the Kievan state, territo ries of the contemporary Belarus were included in the Russian Empire in XVII-XVIII centuries. Kazakhstan, although predominately a Muslim state,

has a unique status of the most culturally close non-Slavic state to Russian Federation among CIS members. Territories of the contemporary Kazakhstan were integrated into the Russian Empire in 1868, and were populated by ethnic Slavs more than any other colonial territory of the Russian Empire or Soviet Union states. By the end of 1989, ethnic Russians accounted for 44.4% of the population of Kazakhstan SSR, today that number dropped to 26.2%, being by far the most Slavic populated state in the Central Asia. But the key to Russia’s positive reception of Kazakhstan and its integration with Russia is low work migration volume. Due to the comparable living standards, Kazakhs are the least likely export work force to the Russian Federation, which could not be said for Tajikistan and Kyrgyzstan that account for more than 1.7 million legal work migrants and at least the same amount of the illegals. Considering that Russia scores 3rd most xenophobic

nation according to World Economic Forum in 2013, possibility of open borders and increase in numbers of foreign migrants cause nation-wide negative feedback and is a factor with which integration plans have to be reckoned with. During

the last mayoral elections in Moscow, the question of limitation of migration from Central Asia and Caucuses was one of the most controversial and yet key questions discussed by all of the candidates.

According to Levada Poll agency more than 65% of Russians support the idea of “Russia for Russians” and up to 84% favor visa regime with Central Asia and Caucasus republics.

Russo-centric Eurasian Integration

Despite the fact the Putin stressed in 2011 that Russia will build upon European experience of ethnically and culturally blind integration, that promotes equal participation of all nations, Russia’s Eurasian integration has drastically shifted towards Russo-oriented integration. The routes of the political nature of the Eurasian integration are derived from Putin’s personal belief that “the collapse of the Soviet Union was the greatest geopolitical catastrophe of the 20st century” and that Russia is the Soviet Union, just with a different name. Such explicitly stated nostalgia for imperial past converted into decisive actions directed to re-establishment of the former political dominance in the Eurasia. But, up to annexation of Crimea, Putin only stressed Russia’s role as a state in the process of integration, rather than cultural or ethnic superiority of Russian people. Indeed, the rhetoric behind the annexation of Crimea changed the proposition that Russia offered to the nations of Eurasia. Instead of the common home of many nations, like the Soviet Union used to be, Putin and his assets stressed the crucial role of Russian civilization and its cause as a key motivation for outward expansion. The annexation of Crimea clearly proved that for Vladimir Putin economic reasoning has lesser importance than restoring what he considers historical justice, reunification of ethnic Russians and Russian speakers

throughout the near abroad and advancement of conservative values as the opposition to the liberalism of the West. One of the key roles in Putin’s rhetoric plays Orthodox Church that supports traditionalism shift and reunification of historically orthodox territories. Obviously, other nations of Eurasia, especially Muslim Central Asia must be confused and feel out of touch with Putin’s new vision for the Eurasian integration. Practically speaking, all non-Slavic nations are expected to assume secondary roles and follow Moscow’s lead. Indeed, such a new turn must cause certain discomfort among Russia’s own Muslim region of Northern Caucasus, Tatarstan and Bashkiria that are seemingly labeled less Russian that the rest of the country.

Ukraine and the Eurasian Integration

Russia-Ukraine conflict has a crucial importance for the demise of the Russia’s Eurasian integration plans.

First of all, Russia’s inner policies of the past few years, especially with regards to political and civil freedoms is a reconstruction of a quasisoviet system that is past focused and intolerable to progressive ideas and practices. The Maidan revolution of February 2014 was an anti-Soviet act, focused on bringing of a new governmental and societal paradigm based on European values and practices. The majority of Ukrainians moved forward into a new political reality, leaving soviet traditions behind and thus shifting even further away from the majority of Russians, still tied up with their soviet past. This new Ukrainian reality is a decisive “no” to Russia’s political paradigm and the possibility of a joint future under Russia’s lead.

Second, historically the importance of Ukraine for Russia could not be underestimated. Contemporary Ukraine is a birthplace of Russian statehood and cultural roots. Throughout the last 400 years Russia was constantly fighting for the inclusion of Ukraine and Ukrainians in Russia’s state, fulfilling Pan-Slavic idea of unity and brotherhood. Russia was able to deal with Serbia’s aspirations to join the EU, but Ukraine’s historical shift away from Russia is the last single most important blow to face of Russia’s Pan-Slavic vision. Without Ukraine, any Russian imperial project would be half-baked and dysfunctional.

Third, Russian political elite has been pressing the idea of the unique Russian civilization (and Ukraine as an integral part of it) that is unreceptive of European values, political practices and civil traditions. If Ukraine is able to achieve a certain level of success and transform into a capable European state with vital economy it would destroy Russian conservative postulates and open up clear possibility for a successful Russian transformation into a true European state in the long run. Ukrainian success as a state is the greatest threat to Russian imperial aspirations.

Fourth, Russia’s annexation of Crimea and its actions in the eastern Ukraine calls for a wide spread concern and anxiety among potential Eurasian Union members, as well as the Russia’s closest allies—Belarus and Kazakhstan. In fact, both Minsk and Astana had voiced their concerns about the future of Eurasian integration even before the Ukrainian crisis, but now their worries grew stronger. Ukrainian crisis gave great cause against Eurasian integration among all Eurasian nations, where opposition to the project now only gains support. No matter how Ukrainian crisis will resolve, the point of no return for the Eurasian integration was crossed, marking a new reality for the region where there is currently no place for EU-type integration and cooperation.

Fifth, the Ukrainian crisis has alerted the West over Russia’s true intention for Eurasia, its nature and goals, making a limited contagion a new policy of necessity. It would be just to assume that both the EU and the US will be alerted to withstand any attempt by the Russian Federation to integrate its neighbors into a new empire-like structure.