Eurasian Economic Union: Consolidation and Progress Continues

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Steady progress. Progress in building the trade and legislative structures within the EaEU continues on a slow but steady course. This is as expected given the experience of how long it took the EU.

Gradual trade integration. The best KPI for EaEU progress is the share of intra-EaU for each member, although this is not perfect. Here there is also steady, but slow, growth.

No immediate expansion. There is no sign of any potential new members joining the five-country union over the medium term. The relationship with Uzbekistan is growing and the 30-million people country is expected to join eventually. Moldova gained observer status, but domestic politics will stop it joining. A free trade agreement with Iran should be signed this year.

Belt and Road will make a difference. This expanding rail network means that transport links across and in/out of the region are improving and trade is becoming easier and cheaper. That may be a power driver for growth in some areas in the future. Chinese companies are more interested in investing in rail infrastructure and in other projects along the transport corridors.

More high-speed links to come. The China Development Bank will fund the Moscow-Kazan high-speed link, and a Chelyabinsk-Ekaterinburg high-speed link is also being discussed. By 2030, trains could cross Russia in one or two days instead of the current seven.

Rail route brings focus to Customs Code. The member states have agreed on a new Customs Code, which will make transit easier, particularly by bringing in electronic declarations. In theory, this could be revolutionary, but it needs to be proven in practice.

Belarus uses EaEU as leverage with Russia. The Customs Code was delayed by six months because Belarus refused to sign. They signed when they agreed on gas prices and other financial terms with Russia. This may be a regular feature of negotiations, as smaller states do not have much leverage apart from holding up legislation.

Sanctions and Belarus likely to remain the main frictions. EU sanctions and Russian counter-sanctions have hampered trade integration inside the EaEU. The new Customs Code should ease some of these problems, if it works as planned. Belarus will continue to grumble publicly about the EaEU, but issues should continue to be resolved bilaterally with Moscow.

Economic recovery. Economies in the EaEU are recovering from a two-year slump, led by the positive contagion from Russia’s recovery and more stable commodity prices. Currencies in the region are also taking their lead from the ruble so as not to lose competitiveness.

Some reform progress. Kazakhstan has taken the lead in pushing fiscal and industrial reforms. Russia is moving more slowly in that direction. Others may follow later depending on results achieved in Kazakhstan.