Following Russia’s launch of a “special military operation” against Ukraine on February 24, 2022, large-scale sanctions were imposed on Russia and Belarus, two members of the Eurasian Economic Union (EAEU). In this context, Russia and Belarus began reconsidering the organizations to which they are parties, such as the EAEU, in a different geopolitical and geo-economic context. The agreements signed after the Eurasian Intergovernmental Council Meeting, which took place at the official residence on the shore of “Issyk-Kul” on 25-26 August, are remarkable in this sense. The decisions signed during the meeting held by the EAEU Intergovernmental Council are as follows: [1]
- – Disposition “On financing industrial cooperation in the Eurasian Economic Union”.
- – Statement within the framework of the issue “On the draft Agreement on the incorporation of the Eurasian Reinsurance Company”.
- – Disposition “On the list of priority integration infrastructure projects in the field of transport of the Member States of the Eurasian Economic Union”.
- – Disposition “On further work to expand the use of national currencies of the Member States of the Eurasian Economic Union in the framework of mutual trade”.
- – Disposition “On the time and venue of holding the meeting of the Eurasian Intergovernmental Council”.
- – Disposition “On submitting the candidacy of a member of the Eurasian Economic Commission’s Council to the Supreme Eurasian Economic Council”.
- – Disposition “On submitting the candidacy of a member of the Eurasian Economic Commission’s Board to the Supreme Eurasian Economic Council”.
As a result of the summit in Cholpon-Ata, the heads of government of the EAEU member states approved the statement on the establishment of the Eurasian Reinsurance Company. According to the statement made by the Russian Prime Minister Mikhail Mishustin at the meeting, the company will provide bilateral insurance support to foreign trade, encourage the development of investment cooperation, provide export credits, and interact with credit agencies and insurance agents.[2]
In this context, Mishustin’s emphasis on the upcoming company being open to work with new international partners is worth noting. As a result of the sanctions caused by the war, it is seen that Russia is trying to make new economical alliances or to strengthen its ties with the old ones. In addition to developing trade with the EAEU countries, Russia is also striving to strengthen cooperation with China, Egypt, India and Iran.
It is stated that the authorized capital of Eurasian Reinsurance Company will be formed with the contributions of the member states and equate to 15 billion Russian rubles. In addition, it was announced that the company’s potential insurance capacity (without the possible expansion) would reach up to 2 billion US dollars.[3] Many experts claim that the emergence of Eurasian Reinsurance Company’s additional insurance capacity may lead to an increase of over 6 billion dollars in bilateral trade volume within the EAEU.
They also claim that it poses risks that will be quite difficult to reinsure, as in the maritime transport sector. This is because the international reinsurance market is highly dependent on large holdings in Europe and the United States and is controlled by Western companies. However, sanctions are mainly imposed on Russian-designed businesses and cannot be imposed against international organizations. Therefore, as an international organization, the EAEU is unlikely to face sanctions. In this regard, it is understood that Russia aims to use the EAEU platform against Western sanctions.
The leaders of the EAEU member states have also discussed the issue of expanding the use of the EAEU countries’ national currencies when making settlements in mutual trade. The draft agreement on increasing the use of EAEU member states’ currencies for bilateral trade instances was submitted by Russia.
The share of mutual settlements in national currencies constitutes %74 of EAEU trade volume as of 2022. Russian rouble has the biggest share among these currencies: According to the Eurasian Economic Commission, 71.5% of the transactions in 2021 were made in Russian roubles, 26.2% in dollars and euros, 1.4% in tenge and 0.2% in Belarusian roubles.[4] Considering the role played by Russia within the EAEU, the increase in the use of national currencies in mutual agreements actually means that the importance of the rouble has grown.
The West, in its confrontation with Russia, has sealed up Russian gold and foreign exchange reserves stored in dollars, indicating a dangerous precedent for other countries. China could be the next target if tensions with the US on the issue of Taiwan escalate. In this context, it is possible to say that the issue of expanding the use of national currencies will be one of the main topics of the Shanghai Cooperation Organization (SCO) Samarkand summit as well, to which Russia and China are parties.
EAEU’s critical geostrategic position makes it a transit hub with key potential that connects Europe and Asia. EAEU ranks second in the world in terms of length of its railway line and fifth in terms of total length of its road. Today, “North-South”, “East-West” and “Europe-West China” routes constitute the main transportation corridors passing through the EAEU territory. In this context, one of the main issues discussed at the EAEU Intergovernmental Council Meeting is the joint work of the EAEU countries in the field of transportation and logistics.
Consequently, following the negotiations, the Prime Ministers approbated a list of priority infrastructure transport projects in the EAEU countries. The list includes the projects of the countries within the EAEU, such as the “North-South” road corridor program from Armenia, the reconstruction of the M-1/E 30 highway (Brest (Kozlovichi)- Minsk – border of the Russian Federation (Redki)) from Belarus, the reconstruction of Kazakhstani sections of the M-32 highway linked to the “Europe-West-China” international transportation route from Kazakhstan, and lastly the electrification of the “Lugovaya-Balykchy” railway section from Kyrgyzstan. The construction and modernization of Russian sections of roads related to the “Europe-West-China” international transportation route, and the constitution of the Russian part of the “Meridian” private highway are mentioned in the document from the Russian Federation.[5]
In total, the list includes 7 projects of the EAEU countries at various stages of implementation. At the same time, the projects are aimed at developing the Eurasian transportation corridors and routes which are located at international transport corridors within the framework of the “East-West” and “North-South” lines, and improving the transit potential and transport infrastructure. The proposal for the development of the transportation corridors was was made by the Prime Minister of Kazakhstan, Alikhan Smailov, during the meeting:[6]
“We need to ensure freedom of transit of goods for the development of exports of the EAEU countries. An important practical step in this direction could be the modernization of infrastructure of Eurasian transport corridors in the East-West and North-South directions.”
In addition, the interaction of these projects with the Chinese Belt and Road Initiative was highlighted. There are many areas of interaction between EAEU and the Belt and Road Initiative. First, one of the main objectives of both projects is the creation of a modern infrastructure. This will lead to an increase in revenue from transit charges and improve transport links between the countries. Second, the EAEU and the Belt and Road Initiative act to simplify customs procedures and remove constraints on the development of bilateral trade. Third, due to the possible US naval blockade against China, China needs to respond to the growing shortage of energy supplies from the Middle East and Africa and diversify its related imports. EAEU countries focus on this issue, so the new infrastructure established will also help to solve this problem.
Fourth, the collaboration between the EAEU and the Belt and Road Initiative is also carried out in the field of large water and environmental projects, which give rise to hopes of creating a number of mechanisms for scientific and technical cooperation and bringing innovative developments to production. Fifth, the EAEU and the Belt and Road Initiative interact on projects related to ensuring food safety. The sixth is the geo-political factor. In other words, due to Russia’s deteriorating relations with the US and the West following the war in Ukraine, Russia has turned to Asia, especially China.
The most effective way for the EAEU to enter the global energy sector is to create a stable and free common gas market within the EAEU, primarily through the volunteerism and cooperation of national gas markets. As a matter of fact, EAEU has recently made attempts to create a common gas market. Today, frequent negotiations are held between member countries to agree on the “single window” principle for services in the common gas market, control over gas use and payment terms based on the market price of gas. In general, it can be said that the formation of the gas market serves as a new window of opportunity for the EAEU countries, including benefits such as maximizing the stability of the energy markets and ensuring the energy security of each country.
On the other hand, Belarus and Armenia are interested in purchasing gas through pricing in Russia’s domestic market instead of this opportunity in the union. In contrast, Russia insists that member states should establish a deeper integration within the EAEU. At the summit in Cholpon-Ata, EAEU members addressed issues related to the formation of the common gas market as well. However, the talks did not reach a clear conclusion. In this sense, it was decided to take a closer look at the developments in the world gas market and to plan how to approach these new factors in the upcoming agreement on the EAEU common gas market.
As a result, the decisions taken following the Eurasian Intergovernmental Council that took place in Cholpon-Ata between 25-26 August in terms of recent worldwide events are noteworthy. These decisions are a sign that Moscow is relying heavily on its partners in the face of Western sanctions. However, it should be noted that Moscow wants to benefit from its partners as well. It is obvious that Russia will use the EAEU platform against Western sanctions. Consecutively, the Kremlin administration argues that under the current circumstances, the EAEU countries are in the need of a deeper integration.
[1]“Итоги заседания Евразийского межправительственного совета в Ulitsaолпон – Ате”, Министерство вкономики и комерции Кыргызской Республики, https://mineconom.gov.kg/ru/post/8319, (Date of Accession: 29.08.2022).
[2]“ЕА veС создаст Евразийску перестраховочну компани для поддержки бизнеса” , Pravo.ru, https://pravo.ru/news/242611/?ysclid=l7hnhps7dn943511609, (Date of Accession:30.08.2022)
[3]“Россия предлагает план расширения расчетов в нацвалютах на территории ЕАЭС”, 24.kg, https://24.kg/ekonomika/243212_rossiya_predlagaet_plan_rasshireniya_raschetov_vnatsvalyutah_naterritorii_eaes/, (Date of Accession: 16.09.2022).
[4]“Доля взаиморасчетов в национальных вал mintтах внутри ЕА UlitsaС достигла в 2021 г. 74%”, Financial One ,https://fomag.ru/news-streem/dolya-vzaimoraschetov-v-natsionalnykh-valyutakh-vnutri-eaes-dostigla-v-2021-g-74/?ysclid=l7hnu82529183136, (Date of Accession: 31.08.2022)
[5]“Ин [раструктурные проектые в с [транспорта согласовали и одобрили страны littleС]”, Kazahstanskayapravda , https://kazpravda.kz/n/infrastrukturnye-proekty-v-sfere-transporta-soglasovali-odobrili-strany-eaes/, (Date of Accession: 30.08.2022).
[6]“Смаилов озвучил ряд мер по налаживани торговли и улучшени укономих показателей в странах ЕА little С”, Kazakhstan Today, https://www.kt.kz/rus/economy/_1377938710.html, (Date of Accession: 30.08.2022).
