Leaders from Russia and Central Asia focus on energy and North-South trade at EAEU summit

Leaders from Russia and Central Asia focus on energy and North-South trade at EAEU summit
The leaders of the five Central Asian countries plus Armenia met in Moscow for the Eurasian Economic Union summit, hosted by Russian President Putin / bne IntelliNews
By Ben Aris in London May 25, 2023

The leaders of the Eurasian Economic Union (EAEU) focused on improving energy ties and boosting North-South trade during the annual summit in Moscow on May 25, as Russia pursues its strategic break with Europe.

Cut off from Europe by extreme sanctions imposed by the West, Russia is looking to expand its relations and trade with its partners to the south and east.

The EAEU summit includes the participation of the presidents of Russia, Belarus, Kazakhstan, and Kyrgyzstan: Vladimir Putin, Alexander Lukashenko, Kassym-Jomart Tokayev and Sadyr Japarov, as well as Armenian Prime Minister Nikol Pashinyan.

As laid out in Russia’s new foreign policy concept, the EAEU has risen in importance as a gateway to the vast markets of Southeast Asia after Russian economic ties were broken by the extreme sanctions regime imposed by the West.

“I think the theme of the forum – Eurasian Integration in a Multipolar World – is highly relevant. It spans the most important issues the Eurasian Union is addressing today when it comes to creating favourable conditions for the EAEU economies and the development of co-operation throughout Eurasia,” Putin said in his speech during the plenary session.

Despite some commentary that Russia’s influence in Central Asia is waning, the EAEU summit highlights Russia's continuing clout in the region, which remains heavily dependent on Russian energy, investment and security guarantees. The Central Asian leaders and Armenia’s Pashinyan underscored the point by all choosing to travel to Moscow and stand on the podium with Putin at the May 9 Victory Day parade on Red Square.

In his opening remarks President Putin emphasised the focus on energy and food security, technological and financial self-sufficiency, digital transformation and the development of transport infrastructure.

"We will focus on ways to ensure energy and food security, as well as technological and financial self-sufficiency, boost digital transformation processes, remove regulatory and trade barriers and develop transport infrastructure," Putin said in his opening remarks.

Trade in the EAEU is expanding at a steady pace. In 2022, trade grew by 14%, to $83.3bn, Putin said.

The leaders discussed the Union's international activities, expansion of trade and economic ties with third countries, and collaboration with regional organisations. Eurasia holds special strategic significance for China as well, which did not participate in the meeting, aligning with Beijing's Belt and Road Initiative (BRI) to enhance communication links between Asia and Europe.

The Central Asian leaders are being actively wooed as the five leaders have only just returned from a meeting in Xi’an, where all five presidents met with China’s President Xi Jinping in the a so-called 5+1 format to discuss their deepening ties with China. A flurry of investment deals were signed ahead of the meeting as China increases its economic commitment to the region.


Gas ties

Energy play a crucial role in Central Asian and Caucasus relations with Moscow. Uzbekistan in particular suffered a debilitating energy crisis this winter and is in the midst of a deal to import Russian gas to fill its energy shortfall.

Armenia also remains heavily dependent on Russian gas imports to meet its energy needs. Since being swept to office in the Velvet revolution in 2018, the nominally liberal president Pashinyan has gone out of his way to build close ties with the Kremlin and has secured advantageous energy deals in return.

Plans to pool energy resources further form one of the topics on the agenda. Russian Energy Minister Nikolay Shulginov stated that discussions are ongoing regarding projects within the framework of a "trilateral gas union" involving Russia, Kazakhstan and Uzbekistan. The plan entails the supply of Russian gas through the territories of these countries, aiming to co-ordinate commercial interests.

Uzbekistan, wary of becoming too dependent on Russian energy, poured cold water on earlier proposals to from a gas union in December, but appears to be warming to the idea now. Shulginov said the plan for the gas union is still “at the discussion stage” for now.

North-South corridor

The development of the North-South corridor was highlighted as crucial by Kazakh President Kassym-Jomart Tokayev. This corridor has “the potential to transform the transport structure of Eurasia, providing a vital link for global logistics,” the Kazakh president said.

“This longitudinal corridor aligns with [the] latitudinal Transcaspian international transport route. This is why we see notable synergy in co-ordinated and systemic development of both routes,” Tokayev added. “This is not only the area of growth for industry, transport, economy; those routes are able of fundamentally changing the level of co-operation and interaction inside the huge Eurasia.”

The corridor aims to attract cargo flows from India, Iran and the Persian Gulf countries passing through Russian territory to Europe. Several countries have participated in the project, with India investing approximately $2.1bn in the construction of transport infrastructure in Iran.

Putin said there is today a higher need to build new and sustainable logistics chains and to develop international corridors at an expedited pace.

“In the past few days, we signed an agreement on laying the Resht-Astara railway with our Iranian colleagues. This will make it possible to link Russian ports in the Baltic with Iranian ports on the coasts of the Persian Gulf and the Indian Ocean. Construction of the new line will get underway this year,” Putin said.

“We are closely co-operating with Azerbaijan in the context of this corridor. We hope for early drafting and signing of the relevant trilateral documents with Azerbaijan’s participation, notably, the agreement on co-operation to develop railway infrastructure and freight shipments on the North-South Corridor,” Putin added.

The Russian president also said that the members of the EAEU are working to end the use of the currencies of “unfriendly countries” in settling their mutual trade deals.

"Full operation of this route will allow us to ensure annual shipment volumes of up to 30mn tonnes of cargo. This railway will be in a position to compete for freight traffic with traditional trade routes. It will facilitate new regional transport hubs and production centres throughout Eurasia, allowing us to create tens of thousands of jobs and open up more opportunities for the development of all EAEU member countries."

"The logistic ties are part of the growing cooperation between an emerging BRICS bloc where the leading Emerging Markets (EMs) are working to deepen commercial and financial ties independently from the West.

“It is important that the majority of participants in international communication agree with these approaches – I would like to emphasise this. And these are not empty words; they really do agree with this approach. We actively co-operate with major international associations, such as BRICS, the Shanghai Cooperation Organisation, the Association of Southeast Asian Nations, the Cooperation Council for the Arab States of the Gulf, as well as multilateral organisations in Latin America and Africa,” Putin told delegates at the forum.

The EAEU summit showcased Russia's commitment to strengthening regional co-operation and expanding its economic influence beyond European borders.