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Eurasian Economic Union: 'Trade not politics'

Eurasian Economic Union: 'Trade not politics'
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Russia, Kazakhstan and Belarus have signed into being an economic union

The pact is intended to boost co-operation between the ex-Soviet neighbours so they can exploit their economic potential and strengthen their positions in global markets.

There were supposed to be four flags shown on the banks of giant TV screens at the signing ceremony held in Kazakhstan’s oil-funded boomtown capital Astana, but the yellow and blue of Ukraine was missing undermined Russian President Vladimir Putin’s dream of drawing the former Communist states closer together.

Kazakhstan’s President Nursultan Nazarbayev stressed this was about trade, not politics: “The union is economic and doesn’t touch on questions of independence, the political sovereignty of the states taking part in the integration process.”

Moscow admits the new alliance will cost it dear. Russia’s Deputy Finance Minister Sergei Shatalov said Belarus and Kazakhstan received about $6 billion (4.4 billion euros) annually from Russia in direct and indirect support, and said that could increase by $30 billion (22 billion euros) if all trade restrictions were lifted in 2015.

But Russia’s Putin thinks it is worth it. He told the audience in Astana: “The mutual-benefit of the integration process is already proving itself in practice: the economic cooperation of Russia, Belarus and Kazakhstan is widening; the structure of trade is developing, the proportion of high-technical goods is expanding in the general structure; the competitive edge of our countries in the world economy is getting stronger.”

With a population of 170 million, the countries in the Eurasian Economic Union have combined GDP the equivalent of 1.7 trillion euros.

By comparison the European Union has 505 million people and their economies total 13 trillion euros.

But Kazakhstan and Russia have one-fifth of the world’s natural gas reserves and 15 percent of global oil reserves.

The creation of a common energy market is for the future, but the new union reinforces Putin’s drive to show Russia that will not be isolated by sanctions, a message he underlined by reaching a 300 billion euro gas supply deal with China last week.

The Eurasian Economic Union – which follows years of tense and difficult negotiations – guarantees the free transit of goods, services, capital and workforces and coordinates policy for the members’ financial systems, but it stops short of introducing a single currency.

Independent analysts have said the trio’s hopes of economically rivalling the European Union, United States or China are unrealistic, even when the single market starts operating fully.

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