Eastern Europe would gain most from EU-EAEU Economic Alliance
_ Yuri Kofner, research assistant, IIASA. Report given at the 28th Economic Forum. Krynica Zdroj, 6 September 2018.*
After Trump the world order is likely to become bipolar once again, divided by an “economic NATO” (“TTIP-2”) and a China-led “Greater Eurasian Partnership”. However, based on their incredible economic compatibility, an economic alliance between the EU and the EAEU would be more beneficial for both of them. And Eastern Europe would gain the most.The title of this year’s Economic Forum in Krynica Zdroj, Poland was “A Europe of Common Values or A Europe of Common Interests?”. In this regard I adhere to the school of neorealism. Common interests are more important than common values. A declaration for common values is possible, but common interests should precede them and build the foundations. Relations between nations should be built on common interests first and on common values only second.2014 has been a hallmark year for Russia. Europe’s irrational behavior in Ukraine during the Euromaidan and subsequent civil war has partially led and intensified Russia’s “Pivot to the East”.Firstly, the ideology of “Westernism” has fallen into a political and intellectual coma in Russia. From 2014 onwards we saw the rise of a new national feeling in Russia, most importantly, among Russia’s intellectual elite, e.g. Sergey Karaganov and Andrey Kortunov. This new sentiment is expressed in the support for Russia’s “Pivot to the East” and the acknowledgment of Russia’s “Eurasian” nature, both in the domestic and in the international sense.Secondly, in 2014 in Astana the Treaty on the creation of the Eurasian Economic Union was signed. Its importance for the future of the economic architecture of the wider Eurasian space cannot be underestimated. This is a new modus vivendi that Europe has to deal with. Since 2016 presidents Vladimir Putin and Nursultan Nazarbayev call for the creation of a “Greater Eurasian Partnership”, but which is officially “open for Europe”.Russia has seen that building relations with Asian nations can be more effective, since Asian nations are more pragmatic in their approach and they build their relations based on their national interests first and foremost. This once again shows that common interests are more effective than common values. Although additionaly Russia and the Asian states also share a lot of common values – cultural conservatism, multipolarity, supremacy of national sovereignty, and of course – pragmatism.This success can be seen by the following:
- Signing of Russia – China gas deals in 2014 worth more than $ 400 bln;
- Development of the Ice Silk Road (Northern Maritime Route) since 2017-2018, including an revolutionary new class of cargo-tanker ice-breakers;
- Singing of FTAs between EAEU – Vietnam (2015) ; EAEU – Iran (2018); Non-preferential agreement EAEU – China (2018). More to come with India, Singapore, Korea.
- Since 2016 the EAEU’s trade turnover has shifted away from the EU in favor of the Asia-Pacific Region.
- Implementation of the conjunction of EAEU and Silk Road Economic Belt.
- Attaining the much needed technological transfer, which is unlikely to come from China;
- Increased investments. According to the Eurasian Development Bank, in 2017 Сhina invested $ 33.7 billion into the EAEU (+ Az, Tj, Ukr), whereas only the Netherlands and Austria combined invested $ 43.7 billion (much of which is re-investment from the Eurasian side, admittedly);
- Security of stable EU demand on EAEU oil and gas supplies.
- The EAEU has a large market for the export of EU manufactured goods and food products (180 million consumers in 2017 and 210 million if Uzbekistan joins the Union);
- The EAEU is a source of cheap resources (oil, gas, coal, lumber, metals, etc.) which is very important for keeping the EU economy competitive in the global competition.
- The EAEU is a relatively high-qualified labor source, e.g. in the IT sector, where the EAEU implements an ambitious “Digital Agenda by 2025”.
- Three Baltic states: Increase of exports to EAEU by 80% (10% in overall exports). GPD growth by 1.2% to 1.8%, i.e. 200 Euro per capita.
- Poland: Increase of exports to EAEU by 70% (5% in overall exports). GPD growth by 0.5%, i.e. 50 Euro per capita.
- Belarus: Increase of exports to EU by 109% (46% in overall exports). GPD growth by 5%, i.e. 290 Euro per capita.
- Ukraine: Increase of overall exports by 26%. GPD growth by 5%, i.e. 90 Euro per capita.
*The views expressed are solely that of the author and may not represent the position of any affiliated organizations.
 “EU-EAEU shared neighborhood countries” is a term used by the author to describe two groups of countries: Firstly, those member states of either the EU or the EAEU that share a common border (Finland, Estonia, Latvia, Lithuania and Poland from the EU side; Belarus and Russia from the EAEU side). Secondly, those countries of the former Soviet Union that either share a boarder with the EAEU or are member states of the EAEU and, at the same time, are members of the EU Eastern Partnership (Belarus, Ukraine, Moldova, Georgia, Armenia, Azerbaijan).