By bne IntelliNews October 26, 2011

Nicholas Watson in Prague, Clare Nuttall in Almaty -

A prickly nationalist, Vladimir Putin has never missed a chance to put the metaphorical boot into the West, so it was no surprise that as the EU stares into the abyss, he chose now to propose a new global power bloc based on the geographical outlines of what used to be the Soviet Union. But is Putin merely trying to resurrect Russia's failed imperial past, or is this perhaps an idea that's before its time?

Writing in the Izvestia newspaper on October 4, Prime Minister (and soon-to-be-again president) Putin announced a "new integration project for Eurasia." This "ambitious goal" would "go beyond" the progress made in the 20 years since the Soviet Union fell apart in rebuilding ties between the former states; it would aim to reach "a higher level of integration - a Eurasian Union."

What shape would this union take? First off, this is definitely not an attempt to recreate the Soviet Union, Putin declared. "It would be naïve to try to revive or emulate something that has been consigned to history," he said, echoing Trotsky's famous speech writing off capitalists.

Rather, in these times of crisis such a bloc would be a way for the countries of the region to create a powerful supranational association that could put its members in a "strong competitive position in the industry and technology race, in the struggle for investors, for the creation of new jobs, and the establishment of cutting-edge facilities." At the same time, the union would be capable of becoming "one of the poles in the modern world and serve as an efficient bridge between Europe and the dynamic Asia-Pacific region."

The grouping, Putin stressed, would also be compatible with the Commonwealth of Independent States (CIS), "not an opposing force," and an open project that would take in new CIS members only when they had made a "sovereign decision based on [their] long-term national interests."

Work in progress

As Putin laid out in exhausting detail in the first half of the article, to some extent the post-Soviet space has already gone some way over the past decade towards the creation of this "Eurasian Union."

Putin has got one thing right: the Eurasian Union is first and foremost a trading bloc, and global trade is fast expanding: trade's share of global GDP has risen from 39% in 1990 to to 61% in 2010 thanks to globalisation. The European Union remains the biggest trade zone on the plant accounting for a fifth of the global volume, followed by developing Asia, which is quickly closing the gap. But Putin's insight - which may prove prescient - is that the fastest growing trade route in the coming decades will be between the EU and Asian. Much of this will have to pass through the Eurasian Union lands, rising from today's trillions of dollars to hundreds of trillions by 2050, according to Citigroup.

Research from the Eurasian Development Bank (EDB) shows that ties between the states of the former Soviet Union disintegrated in the first decade of independence. But the EDB's System of Indicators of Eurasian Integration (SIEI) index shows that while the level of integration within the former Soviet Union as a whole has declined since independence, the five countries of the Eurasian Economic Community (EurAsEC) established in 2000 - Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan - have become increasingly close.

The ultimate aim of EurAsEC was to create a common economic space among its member states. EurAsEc objectives include establishing a free trade zone, with free movement of capital, a common financial market, and common markets for transport and energy. Since its launch, three countries have taken observer status with the EurAsEC - Moldova and Ukraine since May 2002, and Armenia since January 2003. Uzbekistan signed a protocol of accession to the EurAsEC in January 2006, but in October 2008 suspended its participation in the community.

Further steps to liberalise trade between the countries have been taken, most recently on October 19, when a new free-trade agreement was signed at a CIS summit in St Petersburg. Initial signatories were Russia, Ukraine, Belarus, Kazakhstan, Armenia, Kyrgyzstan, Moldova and Tajikistan. Uzbekistan, Azerbaijan and Turkmenistan said they would consider signing the deal by the end of the year. Putin did not release specifics of the agreement, but said it would lower prices for goods, create better conditions for business and make signatory economies more competitive. The agreement is due to come into effect in January 2012.

The most important step towards integration so far, the EDB notes, was the launch of the Customs Union by Belarus, Kazakhstan and Russia. The Customs Union was created on January 1, 2010, but came into force six months later after the Customs Code was ratified in all three member states. July 1, 2011 was set as the deadline for removing all customs barriers between the three states.

There is now a two-speed integration process in the region. Russia, Belarus and Kazakhstan plan to establish a Common Economic Space from January 2012, which Putin called in his article, "without exaggeration, a historic milestone for all three countries and for the broader post-Soviet space." By building the Customs Union and Common Economic Space, Putin says the countries of the region are laying the foundation for a prospective Eurasian economic union - a huge market that will encompass over 165m consumers, with unified legislation and free flow of capital, services and labour force. And from that, asserts Putin, the natural step would be this "Eurasian Union," which would include closer coordination of economic and monetary policy, including the use of a single currency and a bureaucracy to manage it all.

The history man

Putin's announcement inevitably drew a range of reactions, from the sneers of Russophobes to the drum-beating of Russian nationalists, and everything in between. However, few are in any doubt that with Putin ready to retake the presidency next year and in doing so become, whatever one thinks of him, an historic Russian figure, this represents the grand policy and vision to match his status. After all, historic figures need historic deeds.

Dmitry Peskov, Putin's spokesman, highlighted the significance of the Eurasian Union when he said that, "it will be one of the key priorities of Putin's work over the next six years." Interestingly, Eugene Chausovsky of the private intelligence company Stratfor points out that this not only shows the importance of the project for Russia's foreign policy agenda, "but also serves as evidence that Putin has been planning to return to the presidency all along."

Most critics have chosen to focus on the idea's fundamental flaw: Russia is still viewed, to a greater or lesser degree, with suspicion by all the countries in the region for obvious historical reasons, and this will play a big part in how willing they will be to sign up for a project that will, regardless of Putin's denials and no matter how it's set up, be dominated by Moscow.

Putin can probably count on at least the two other members of the Customs Union, the organisation out of which this Eurasian Union will evolve.

In the same newspaper in which Putin laid out his vision, Belarusian President Alexander Lukashenko, an unreconstructed Soviet apologist and now pariah of the EU after his theft of the presidential election last December, wrote a cloying piece praising Putin's vision. "This is not meant to be a compliment to my colleague, the former Russian president and current prime minister, but I must say that this article was a real event," Lukashenko gushed.

Lukashenko's toadying is, of course, designed to ingratiate himself with the Kremlin, from whom he desperately needs cash in order to stave off economic disaster. Belarus is isolated more than ever and depends heavily on Russian credit and energy to survive.

After Putin, the greatest enthusiast for the Eurasian integration project is probably Kazakhstan's President Nursultan Nazarbayev. Integration within the former Soviet space fits with Nazarbayev's foreign policy of reaching out internationally, as well as with his ambitions to be a global statesman. Nazarbayev has already proposed the launch of a common currency for EurAsEC. At the Astana Economic Forum in March 2009, Nazarbayev suggested that the non-cash currency be named the "yevraz". Proposed as a measure to combat the financial crisis crippling the region at that time, adoption of an entirely new currency would also be a more acceptable solution in Astana than the use of the Russian ruble as a common currency.

Who else? It's inconceivable that Georgia, which fought a war with Russia in 2008, or the Baltics, firmly ensconced in the western camp, would join. Putin said in his article that the Customs Union and Common Economic Space "will expand by involving Kyrgyzstan and Tajikistan." However, Kyrgyzstan is actually undecided about joining the Customs Union, and while Tajikistan is understood to be keen to join, it could only do so after Kyrgyzstan's accession because it doesn't share a border with any of the existing member states.

However, the proposed Eurasian Union seems a step too far for Tajikistan. Speaking to newswire Asia-Plus, leaders of the ruling People's Democratic Party (PDP) and several opposition parties dismissed the idea as a pre-election stunt by Putin. PDP leader Usmon Soleh said the idea seemed to be intended to appeal to those within Russia who wanted the Soviet Union to be restored; Shodi Shabdolov, leader of the opposition Communist Party of Tajikistan, raised the spectre of the influence of Russia's oligarchs in the project: "It is plain to everyone today that nobody wants to unite on the basis of the predatory principles of [Anatoly] Chubais and [Oleg] Deripaska."

Alluded to but not mentioned by name in Putin's article was Ukraine, the country that Russia is keener to bring back into the fold more than any other. Russia has recently been trying to tempt Ukraine into joining the Customs Union, but Kyiv worries that this would scupper its chances of joining the EU - a goal that looks more distant since a Ukrainian court jailed former PM Yulia Tymoshenko on dubious charges and the EU cancelled a scheduled meeting with Ukrainian President Viktor Yanukovych on October 18 in a show of displeasure.

Putin addressed this Eurasian Union-versus-European Union tension in his article: "Some of our neighbours explain their lack of interest in joining forward-looking integration projects in the post-Soviet space by saying that these projects contradict their pro-European stance. I believe that this is false... Soon the Customs Union, and later the Eurasian Union, will join the dialogue with the EU. As a result, apart from bringing direct economic benefits, accession to the Eurasian Union will also help countries integrate into Europe sooner and from a stronger position."

It's here, note some commentators, that Putin's true thinking and motivation for the Eurasian Union lies. The Russian PM is implying that membership of the Eurasian Union offers states that have little or no chance of joining the EU the opportunity to access EU markets, technology and institutional structures through a different door. Holding open that door, of course, is Russia, whose position would now be enhanced and central; the other members wouldn't negotiate with the EU directly, but through Moscow as part of the bloc. Thus, by solidifying its hold over what it calls the "near abroad," Russia achieves its long-lost status as one of the global centres of power in a world of continental-scale blocs.

An oversight by the Kremlin and then careless admission by an official perhaps betrays Russia's real thinking about the place its sees for the former Soviet republics in all this: spokesman Peskov told reporters that the publication of Putin's article was not coordinated with Belarus, Kazakhstan or any partner state. The Russian leader, notes political analyst Vladimir Socar, "did not consult any counterparts, he simply purports to speak on their behalf."

On paper at least, Russia's goals for the Eurasian Union project must surely look attractive to it. But the British historian Mark Mazower, writing in The Guardian, has a warning about being careful what you wish for. "If the coupling of the Russian economy to the southern Stans brings with it a decoupling from the more powerful regional dynamos to its west and east, it will end up as a drag, not a spur, to growth - and Russia will pay a heavy price for an old-fashioned dream of imperial glory."


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