Greater economic integration within the Commonwealth of Independent States (CIS) has been a goal of some policymakers ever since the fall of the Soviet Union 20 years ago. The dream finally seems to becoming a reality, with Russia, Belarus, and Kazakhstan removing all barriers to trade and capital and labor movement as of January of this year. But as the European Union, a successful model for regional integration, enters the most difficult phase of its existence as an economic and political union, policymakers need to consider whether the idea of a “Eurasian Union” is a good one. Could further integration, or an expansion of this current zone, help or hinder the countries of the region?
The author takes a look at the issues surrounding a possible Eurasian Union and examines the possible effects on trade in goods, capital, and labor for the region. While integration in the CIS has been discussed and debated, with many initiatives coming and going over the past two decades, little attention has been paid to the pros and cons for the various countries involved in integration. This study attempts to fill that gap and analyzes the gathering momentum for integration and how it can contribute to economic development.
In particular, this report found the following key results:
Integration across the whole CIS space over the past two decades has actually decreased, making it less likely that re-integration can bring tangible economic benefits.
Where integration is occurring is in important sub-regional groupings, such as the Caucasus and Central Asia, and amongst the three countries that are actively pushing for integration.
Energy remains the greatest driver of integration within the CIS, due to reliance on Russia and Kazakhstan, but the entire region tends to rely on natural resource-intensive exports to drive trade.
Ukraine will be an important player in any Eurasian Union, but only if it can derive benefits beyond merely stabilizing energy supplies. Ukraine may also benefit from integration if it will allow the institutional liberalization that has thus far eluded the country.
Central Asian countries such as Kyrgyzstan and Uzbekistan are unlikely to benefit from increased integration across most metrics, given their reliance on each other and need to expand trade with other neighbors (i.e. China) instead of Russia.
A Eurasian Union can help drive trade liberalization by eroding the basis of support for certain trade barriers; with growth obtained through liberalization within the CIS, it will be harder politically to justify retaining barriers to the rest of the world.
Given these results, the author concludes that Eurasian integration will only be successful if it can indeed open trade links, instead of being merely a counterweight to the EU. It is recommended that policymakers within the CIS use integration to push for increased liberalization both inside and outside of the blocs for its own sake, freeing up trade and capital flows in a region that has sadly seen far too many restrictions on both.