Overcoming regional competition in the Eurasian region

The European Union (EU) does not maintain formal trade relations with the Eurasian Economic Union (EAEU or Eurasian Union). At the same time, the EU attempts to develop interregional free trade agreements with the Southern Common Market (Mercosur) and the Association of Southeast Asian Nations (ASEAN). The different approach taken in relation to Eurasian regional organisations has given rise to zero-sum politics that have carved up the neighbourhood, of which the Ukraine crisis is a prominent example. Regional competition between the EU and the EAEU has sandwiched states in the Eurasian region and forces them to express a clear preference. As a consequence, the European Neighbourhood Policy (ENP), developed in the years following the EU Eastern Enlargement, produced exactly what it sought to prevent: new dividing lines.


Eurasian integration: a primer

 After the end of the Soviet Union, the European Community concluded several Partnership and Cooperation Agreements (PCAs) with the Newly Independent States, including Armenia, Kazakhstan, Kyrgyzstan and Russia. All of these agreements express the partners’ desire to encourage “the process of regional cooperation in the areas covered by this Agreement between the countries of the former USSR” (preamble, para. 9 EU-Russia and EU-Armenia PCA). In that spirit, Nazerbayev, then president of Kazakhstan, launched the idea of the creation of a ‘Eurasian Union’ in a speech at Moscow State University in 1994. Since then, many attempts have been made to create a regional organisation, of which the Eurasian Economic Union, established in 2014 and consisting of Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia, is the latest and most successful.

The Eurasian Union is a customs union which is institutionally similar to the European Union (Karliuk, 2015). Its highest decision-making body is the Intergovernmental Council, which is supported by the Eurasian Economic Commission. The Court of the EAEU ensures uniform interpretation of EAEU law (Vinokurov, 2018). The Astana Treaty establishing the EAEU stipulates that the Union shall have international legal personality (article 1.2) and the competence to take common measures regulating foreign trade (article 2 and 33.3). It is often argued that Eurasian regionalism is a mere Russia-led geopolitical project with the aim of re-establishing the regional influence of the Soviet Union (Kostanyan and Emerson, 2013). However, the development of regional integration in the Eurasian region rather confirms to a wider trend of regional integration around the world as mapped by the World Trade Organisation(Duina and Morano-Foadi, 2011). States conclude regional trade agreements in an attempt to capitalise on the opportunities of globalisation as well as to shield themselves from the negative consequences (Duina and Morano-Foadi, 2011). As the EAEU member states are still connected through shared infrastructure such as grid networks and highways that date back to Soviet times (Hancock and Libman, 2016), they have a genuine interest in regional cooperation beyond Russia’s geopolitical ambitions.

Incoherency and its consequences

 Even though the EU’s original PCAs with former Soviet republics explicitly encouraged regional cooperation, the EU has formally ignored initiatives undertaken to that end in recent years. In relation to ASEAN and Mercosur, the EU has attempted to develop interregional trade agreements. In the Eurasian region, the European Union seeks bilateral agreements, often in the form of association agreements including a free trade area, with (potential) EAEU member states individually. Because of the legal nature of both regions as customs unions, a state cannot be member of one organisation and conclude a free trade agreement with the other. Therefore, the EU and the EAEU are competing regional organisations in legal terms. (Van der Loo, 2012). As a result, states are forced to make a clear choice, either pro-EU or pro-EAEU.

The EU’s approach has given rise to grave consequences. First and foremost, the Ukraine crisis is a direct result of the country being pressured to choose between the two incompatible regional organisations. At the one side, the EU leveraged its market access to draw Ukraine into a free trade agreement that could boost the state’s economy. On the other side, Russia issued threats in order to get the country to join the Customs Union, which later evolved into the Eurasian Economic Union (Headley, 2018). President Yanukovych decided to join the Customs Union, which sparked such great civil unrest that the president fled to Russia. A new government under President Poroshenko signed the free trade agreement with the EU in 2014. Up until today, Ukraine remains a divided country, pulled apart by these competing forces.

Secondly, Armenia has been pushed to pick a side. In 2013, the EU sought to conclude an association agreement, including a free trade area, with the country. Armenian President Sargysan declared his willingness to sign, but shortly after, the country joined the Eurasian Economic Union under Russian pressure over the Nagorno-Karabakh conflict (Delcour, 2015). Given the legal incompatibility between the two regional organisations, the association agreement could not be concluded. The country was forced to make a choice and decided in favour of the EAEU.

The European Union’s policy is incoherent to say the least. First of all, it initially promoted regional integration and subsequently failed to cooperate with the Eurasian regional integration initiatives that developed. Secondly, the ENP, a policy that aimed to avoid establishing new dividing lines, did exactly that. States were forced to make a firm choice in terms of their regional integration trajectory. Of course, the carving up of the neighbourhood should not solely be attributed to the European Union. It constitutes the result of a geopolitical game in which Russia played a large role. Nonetheless, the EU clearly handled the situation incautiously.

The way to go

 Luckily, it is not too late just yet. For all member states of the Eurasian Union including Russia, the EU is one of their most important trading partners. By developing formal trade relations with the Eurasian Economic Union, the EU could overcome the political deadlock faced in EU-Russia relations at the moment. This doesn’t mean that the EU needs to turn a blind eye to democratic and human rights shortcomings in the countries concerned in favour of an elaborate trade agreement. Just like in the FTAs it attempted to conclude with ASEAN and Mercosur, the EU can leverage access to its consumer market in order to push for democratic and human rights reforms.

Agreements developed between the EU and the EAEU can play an important role in the peaceful settlement of the Ukraine crisis, including the annexation of Crimea. The EU is not built to withstand the current confrontational stance against Russia. The best it can do is to use its economic power and the prospect of an interesting EU-EAEU trade agreement to push Ukraine and Russia in reaching a negotiated solution (Gehring, Urbanski and Oberthür, 2017). In a similar fashion, the European Commission pulled Turkey closer to the EU through increased cooperation after the Turkish invasion of Cyprus in 1974 (Buzan and Diez, 1999). The carrot-and-stick approach taken in the stabilisation of the Western Balkans serves as another example (Lavenex, 2011). Based on those experiences, the process of formalising trade relations with the EAEU should draw on the steppingstone procedure of pre-accession conditionality, except that the carrot is not EU membership, but an elaborate mutually beneficial trade agreement.

Where the Mercosur and ASEAN free trade agreements failed, an EU-EAEU interregional trade agreement has more chances of succeeding because the benefits that flow from increased economic interdependence are way larger than for ASEAN and Mercosur. After all, the mechanism that cemented the peaceful settlement of conflicts in Western Europe has the potential to do the same on a larger scale. In addition, the EU’s leverage vis-à-vis the Eurasian region is a lot stronger since the countries involved are significantly more economically dependent on the EU. For these reasons, both the EU, the EAEU and the states sandwiched in between would greatly benefit from looking at each other like partners rather than adversaries. A change in the EU’s attitude is key in turning the current zero-sum politics into a positive-sum game.

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