06.05.2017 Author: Dmitry Bokarev

EAEU: New Step towards Eurasian Integration

56453242343The Eurasian Economic Union (EAEU) is one of the youngest and most promising economic alliances in the world today. In a relatively short time, the union has achieved considerable success and become an attractive partner for many states on the sidelines. The EAEU mainly focuses on consolidating the economic cooperation of Eastern countries. On this basis, a free trade area (FTA) with Vietnam has already been established, and by the end of 2017, an agreement on an FTA with Singapore should be signed. Negotiations are currently underway with Iran, Thailand, India and other states. Despite the fact that the main goal of the EAEU is the economic integration of Eurasian countries, the influence of this multinational association is beginning to spread beyond the region. For instance, Egypt, one of the most developed states in Africa, is showing great interest in establishing structures of cooperation with the EAEU.

The EAEU includes five countries (Armenia, Belarus, Kazakhstan, Russia and Kyrgyzstan), which are rich in natural resources and have a total population of about 184 million people. In the first few months since the beginning of the work of the EAEU in 2015, economic cooperation between its members has grown exponentially. This attracted the interest of other countries.

In May 2015, the Arab Republic of Egypt, which has been an important partner to the EAEU countries, filed an official application for the establishment of an FTA with the EAEU. On December 26, 2016, the Supreme Eurasian Economic Council (SEAEC) held a meeting during which a decision “On the Commencement of Negotiations with the Arab Republic of Egypt on Conclusion of an Agreement on a Free Trade Area” was adopted. According to the document, all the EAEU Member States should start negotiations with Egypt on the FTA, with the facilitation of the Eurasian Economic Commission (EEC).

In March 2017, a delegation of the Russian Federation Council led by its chairperson Valentina Matvienko paid an official visit to Egypt. In Cairo, Ms. Matvienko was received by Egyptian President Abdul-Fattah Al-Sisi, with whom she proceeded to discuss the details of the agreement on the EAEU-Egyptian FTA. Later, addressing the press, the Chairperson of the Russian Federation Council said that she was counting on the speedy establishment of the FTA, which would lead to the expansion of Egypt’s trade, economic and investment cooperation with both Russia and all the countries of the EAEU.

Another state close to establishing an FTA with the EAEU is the Islamic Republic of Iran, which has numerous links under joint economic projects with Russia and Armenia. In February 2017, Russian First Deputy Prime Minister Igor Shuvalov paid an official visit to Iran’s capital Tehran. One of the main issues in his talks with Minister of Industry, Mines and Trade Mohammad Reza Nematzade and other important members of the Iranian government was the establishment of an FTA.

In March 2017, Iranian President Hassan Rouhani visited Russia. During a meeting with him, Russian President Vladimir Putin recalled that in 2016, Russian-Iranian trade turnover grew by 70%. With such intensive trade, the creation of an FTA will most likely be extremely beneficial to both parties. The Iranian leader also noted that Russian-Iranian economic cooperation has reached new heights, and that an FTA with the EAEU will allow Iran to expand trade with the countries of the Union and create new conditions at the regional level.

However, the exact time of the establishment of the FTA between the EAEU and Iran is yet to be announced. In April 2017, the Supreme Eurasian Economic Council held a regular meeting, where Mr. Shuvalov noted that the agreement had not yet been finalized, and that additional work would be required for its conclusion and signing.

Nevertheless, it is unlikely that the EAEU-Iran FTA project has faced serious obstacles. It should be recalled that in addition to intensive trade, Iran cooperates with Russia (which plays a key role in the EAEU) in nuclear energy. No other country has provided as much assistance to the Iranian nuclear project as the Russian Federation. Currently, Russian specialists continue their project of building a nuclear power plant in Bushehr for Iran. In addition, Russia and Iran also cooperate in the oil industry, which is the backbone of the Iranian economy. Finally, Iran and the Russian Federation also cooperate in the political sphere. Here, it is important to remember the role that Russia played in facilitating the lifting of the sanctions imposed on Iran in connection with its nuclear program. In this light, the establishment of an FTA between the EAEU and Iran will most likely be realized in the near future.

The EAEU free trade areas with Egypt and Iran will undoubtedly lead to an increase in trade amongst all the participating countries. According to expert forecasts, exports of coal, ferrous metals, cars, as well as food and tobacco products from the EAEU countries to Egypt should significantly increase. With Iran, not only trade turnover will increase, but also cooperation in the oil-production sphere.

However, the creation of an FTA with these countries may have a different, much more significant, result that will affect the economy of the whole Eurasia. After all, Egypt is an outlet to the Mediterranean Sea, through which, since the ancient times, sea trade between Europe and Africa has been conducted, and to which the land routes from Asia led. The Egyptian territory is also important for the presence of the famed Suez Canal connecting the Mediterranean Sea with the Arabian Sea and the Indian Ocean. The Suez Canal is one of the most important transport corridors on the planet, through which virtually all maritime traffic between Europe and Asia is conducted. Iran also has direct access to the Arabian Sea.

As mentioned before, an FTA between the EAEU and Singapore is expected to be established in 2017. Singapore is located near the Strait of Malacca – another gateway to the sea through which shipping is carried out between Southeast Asia and the rest of the Eurasian continent. Almost all the sea links between the east and west of Eurasia pass through the two narrow sections of the Strait of Malacca and the Suez Canal, and the EAEU has access to both of them through Singapore and Egypt. In addition, the EAEU can access the middle of this sea route through Iran. At this juncture, it should be recalled that after the establishment of the EAEU’ FTA with Iran, the international railway corridor ‘North-South’, which will connect the Persian Gulf to the EU countries through Azerbaijan and Russia, can be updated, completed and put into intensive operation. Thus, by creating an FTA with the listed countries, the EAEU will get access to one of the most important sea routes on the planet, with several important railway connecting points.

It should also be added that this sea route between Europe and Asia is the basis of the Chinese infrastructure project ‘21st Century Sea Silk Road’. Integration with China on its ‘New Silk Road’ project is an important step on the way to Eurasian economic integration, and is among the most important tasks of the EAEU. And the EAEU seems to be drawing closer to its implementation.

Dmitry Bokarev, expert politologist, exclusively for the online magazine New Eastern Outlook.