BOFIT Viikkokatsaus / BOFIT Weekly 2018/44

The union has evolved on top of earlier economic cooperation agreements among former Soviet republics. Upon the break-up of the Soviet Union, twelve of its 15 members (all except the Baltics) established the Commonwealth of Independent States (CIS). Free trade relations were established among the countries, but there was no deeper integration. Consequently, Russia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan founded the Eurasian Economic Community in 2000. As integration stalled also under this new framework, Russia, Belarus and Kazakhstan established the Eurasian Customs Union (EACU) in 2010 and the Eurasian Economic Union (EAEU) in 2015. Armenia and Kyrgyzstan acceded in 2015.

The Union’s basic idea and governing structure largely mimic the European Union, but its functions have been limited to supporting economic integration. According to the founding treaty, the Union’s mission is to incrementally implement the free movement of goods, services, labour and capital. Further goals include macroeconomic policy harmonization and perhaps a currency union. A fairly ambitious schedule has been set for market unification: a common electricity market by 2019, oil by 2024, natural gas by 2025 and finance by 2025. Implementation of all plans, however, requires the conciliation of differing views and interests among the member states.

To date, the Union has made progress mainly on making border crossings easier. Customs inspections on internal borders have nearly ceased, and customs procedures and payments on external borders have been to some extent harmonized. The adoption of a common customs code at the start of this year has facilitated trade across the Union’s external borders. The electronic customs declaration system also helps to monitor shipments through the Union territory. Without oversight, it would be difficult for the Union to make free trade agreements with other countries and unions because such agreements typically apply only to goods manufactured in the countries that are parties to the agreement. In addition to unified customs rules, the Eurasian Economic Commission seeks to eliminate some individual barriers to competition. Among other things, it has begun promoting reciprocal recognition of academic degrees, more open public procurements and open waterways for member country vessels.

While former Soviet states are the focus of expansion, the Union’s name intentionally does not rule out membership of any country on the Eurasian continent. The Union also seeks to improve its external trade relations. It has signed a free-trade agreement with Vietnam and looser cooperation agreements with China, Egypt and Iran. The Union’s effort to seek closer economic relations with countries in Western and Southern Asia partly overlaps with China’s Belt and Road Initiative, even if cooperation of these projects was officially agreed upon in 2015.