Vladimir Putin’s idea of a Big Eurasian Partnership, first voiced at the St. Petersburg Economic Forum in 2016, looks even more relevant today, mainly because of the global risks that can affect the nature of international relations and the global economy.
The latest international events, such as the US missile strike of Shayrat Airbase in Syria, Donald Trump’s insults of Syria’s President Bashar Assad, have very visibly debunked American President’s statements that the United States are not going to police the world, while substantially contaminating the international political climate.
These actions by the US revive fears that Washington could try to bring back its global leadership status, including by promoting currently suspended Trans-Pacific and Trans-Atlantic Partnerships (perhaps in a new format), and that the US have only paused their formation and operation for 2-4 years, until the new President “gets a feeling” of their importance.
Other risks may also become a reality:
– EU crisis that can break out if anti-EU forces win elections this year in four key countries of the European Union (Italy, France, Germany and the Netherlands);
– Brexit aftermath;
– Possible referendum in Scotland regarding independence from the United Kingdom;
– Global security risks to trading flows resulting from military conflicts along key transport routes (South China Sea, Gulf of Aden, Central Asian land routes);
– Continuing sanctions and counter-sanctions policy, affecting Russia and a number of other countries.
Economic challenges faced by EEU countries have to be taken into account as well (such as active development of new technologies, robotics, new information products, genetic engineering, etc.). Given this background, the establishment of the Big Eurasia would be another element of a new world order, response to risks and challenges of the modern world, and one of the main pillars of the global politics.
Eurasian Economic Union (EEU), established two years ago, is also pushing for more targeted actions to create the Partnership. The Union still finds it hard to resist the external pressures and counter them with its still minor strengths. As a result, the intra-Union trade and foreign trade have decreased over the last two years (even though they are showing recent signs of improvement). Coordination of macroeconomic and commercial policy still shows weaknesses. Economic interests of EEU member states aren’t always compatible. No single currency that would cement the Union has been developed to date either. Clearly visible centrifugal forces are rocking the Union building.
All these issues can be dismissed for the Union being still a new formation, lacking experience, etc. However, the fact is it still isn’t a viable entity. The situation calls for desperate measures to strengthen it, both from within and at the perimeter.
In the context of EEU, we believe developing the Big Eurasian Partnership will require smoothly running processes for developing industrial cooperation and new production chains, which are destined to become one of the key bonds cementing member states’ economic mechanisms.
Implementing these initiatives requires consistent joint action for radically improving the status of innovation sector in the EEU countries and developing innovations-oriented technology cooperation. This calls for implementing structural reforms in the economies of member states. These must be focused on the production sector, primarily in the micro-economy. In this regard, we believe it is advisable to develop a common model of innovative economy as a result of structural reforms implementation. The structural reforms strategy will be centered around steps to implement innovations, diversify production and facilitate growth of exports.
The ultimate goal of building the production chains is to strengthen integrated manufacturing complex in the EEU states based on an innovative economic model. The core of this complex would determine the strength of the entire Union.
In terms of perimeter strength, the Big Eurasia geopolitical project would be centered around a consolidated fuel, energy, transportation and logistics infrastructure of the EEU countries. The accent would be made on integrating a pool of leading Russian companies into the existing global economic connections in Asia and Europe, considering EEU competitive advantages (fuel, energy, inputs, food and other resources and its geographic location). At the same time, it is important to prioritize development of technological cooperation on the basis of the newly developed innovative economy.
We expect our partners to supply highly processed products, high-quality consumer goods and food products, but primarily 5th and 6th technology revolution products.
At this stage, the Partnership formation is visualized in the format of Free Trade Areas being established (EEU-SCO, EEU-ASEAN, other countries developing free trade relationships with EEU (Iran, Israel, Egypt) and mechanism for integration of the EEU with the Silk Road Economic Belt. Finding a consensus with that many states can be a non-trivial task, but some work in this direction is already in progress. Since 2015, EEU and SCO have been preparing agreements on continental economic partnership, effectively looking for approaches to a comprehensive SCO-wide treaty. Almost simultaneously,. Participants of the Third Russia-ASEAN summit in Sochi on May 19-20, 2016, were discussing the prospects for building a EEU-ASEAN Free Trade Zone, that could contribute to the establishment of an Asia-Pacific Free Trade Zone.
It is important to emphasize that all the Free Trade Zones should be developed using a common concept. We believe it is reasonable to build a FTZ with SCO, ASEAN and other countries in the form of economic unions, which stipulate free movement of goods, capital, services, and labor, but also use of such tools as encouraging investment, protecting intellectual property, providing financial services, harmonization of technical regulations, coordinating sanitary regulation measures, lowering or removing technical barriers to trade, etc.
What risks can Russia expect in this respect, and how can these be avoided? First of all, it should be noted that by “signing” up for FTZ, Russia and other EEU member states will face a heavy pressure from their partners in various segments of their industry, such as production of furniture, clothes, tableware and shoes.
The only way out for EEU manufacturers, including Russia, is to actively seek investors, while doing this within a clearly cut foreign economic strategy based on the development forecasts of global economy and Southern and Eastern Asian markets. This is necessary to develop in-house production in the member states and get integrated into global technology chains by actively diversifying exports. Proposed investors are banks in South Korea and Singapore, that could be used as gateways for other banks from South-East Asian countries. Russia, together with its old and new partners, could supply and manufacture a number of hi-tech products. It should be kept in mind, though, that Russian goods will be able to enter the markets in SCO and ASEAN countries.
As for the integration between EEAU and the Silk Road Economic Belt, the priority for EEU countries would be to determine a clear set of transportation routes for EEU-China cooperation. The most important project for RZD, in particular, could be the construction of high-speed railways in the Central part of Russia. The integration projects must be aimed not only at developing infrastructure but also at developing the adjacent territories.
Another important issue for further integration between EEU and SREB is the construction of a railway link between Armenia and Iran, which would join the existing railway networks in the two countries and help Armenia enter Kazakhstan, China and other markets via Iran.
Despite the agreements on building the Northern rail route, China is actively building South Silk Road link, with transshipment at the Caspian Sea ports. For example, terminals are being actively built near Baku to receive Chinese goods. This calls for speeding up the EEU-SREB integration works.
It follows from the above paragraphs that both external factors and internal development demands in the EEU require creating a closer integration and interaction between EEU and new economic operators in Eurasia and beyond.