INTEGRATION AGAINST THE BACKDROP OF DEVALUATION

No matter how enthusiastically officials have reported the agreements reached and the extremely promising future of the Eurasian Economic Union (EAEU), statistics impartially state that there has been a 20-25-per-cent reduction in the trade turnover among its members compared with 2014 which was not its best year. For example, Russia has reduced its trade with its EAEU partners by more than 30 per cent and Kazakhstan by 22 per cent. But then economic cooperation between Armenia and Kyrgyzstan has drastically increased. This is just a small alteration since these countries did not trade with each other at all before joining the union.

But this increment has not had any effect on the overall statistics: Armenia's foreign trade turnover within the EAEU has fallen by 20.6 per cent and Kyrgyzstan's by 14 per cent. In 2014, the total growth in the GDP of the member states of the Eurasian Economic Union was only 0.9 per cent. In this current year a certain decrease is forecast correspondingly.

Naturally, one of the main reasons for this situation is the instability on world markets, first and foremost in energy prices. The soundest way to defend oneself against a crisis is to opt out of unnecessary acquisitions. This is a familiar scenario for anybody and is well understood. States that are restricting imports are behaving in this way. In the case of the EAEU, this strikes a blow at the integration processes. This was observed within the union both last year as well as continuing in the current year. Vivid examples are the restrictions that Kazakhstan has imposed on imports of Russian petroleum products and Belarus's suspension of petrol supplies to Russia. 

Bearing in mind the different sizes of the economies of Russia and its EAEU partners, the mechanical abolition of the customs' barriers may lead to a serious disproportion in mutual trade. This is particularly true of the Kazakh economy. This can possibly be explained by the fact that the draft EAEU Customs Code which was almost ready back in December last year has still not been approved. Quite recently Kazakhstan proposed a cardinal working up of the code, keeping its general outlines, and offering a specific form of the provisions for the union's member-countries to examine.

Furthermore, there is the impact on the union countries' economies inflicted by the economic sanctions imposed on Russia and those introduced by Russia in response, as well as the drastic devaluation of the rouble and its great volatility. The EAEU countries account for 7.6 per cent of Russia's export trade, but owing to the fact that 80 per cent of the union's GDP is accounted for by the Russian economy, successful integration mainly depends on how quickly that country will be able to extricate itself from the crisis. The longer that Russia's geopolitical interests outweigh economic ones, the longer it will take the union to come into being. It is in Russia's interest to build a sound economic foundation for cooperation for its EAEU partners and not make costly political projects its cornerstone.

Experts believe that the potential for integration has been far from exhausted. The first year was spent working out cooperation mechanisms. For example, seeing the drop in the trade turnover, they began to do away with unnecessary barriers and that has borne its own fruit. They began to understand that unified goods, services, capital and manpower markets should appear and an agreed economic policy should be pursued.

It is precisely the insufficient goods, services, capital and investment flows that form weighty grounds for rejecting the initial plans for the rapid introduction of a single currency on the territory of the union's member-countries. Acco-rding to the Eurasian Economic Com-mission's (EEC) conclusions based on the results for 2014, the share of the EAEU member-countries mutual trade in the overall volume of the foreign trade turnover was only 11.7 per cent, compared with that of the European Union, where this figure was 60 per cent. This means that for the moment there is not a sufficiently high level of economic cooperation and their output is not competitive, raw materials predominating in the export trade. 

The conclusions were drawn at the Second Eurasian Economic Congress held in Moscow at the beginning of December, which summed up the results of the union's year in existence. The fact that the first year was so difficult does not bother the EEC members at all, who think that this has allowed them to "adapt themselves to working in crisis conditions and immediately create the mechanisms for combatting them."

The formation of a common labour market was noted among the positive results of the work. The working people of the member-states have gained the opportunity to work on civic and legal contracts and also to use the free medical services and national insurance. Besides this, work is currently under way on a cooperation agreement in the field of pension provision. It is called upon to resolve the issue of exported pensions and the registration of the employment record accumulated in another union member-country.

Particular attention was paid at the forum to the EAEU's successful contacts with other unions and individual countries. "The EAEU has become a major political player," Tatyana Valovaya, the EEC minister for the main integration and macro-economic directions, thinks. "Many countries want to cooperate with the union and are asking for a free trade zone to be set up with us. We organised the first zone like this with Vietnam, with Israel and India to follow."

It is interesting that representatives of major European business circles were the most enthusiastic defenders of the EAEU's existence at the congress. They constantly emphasized the need for dialogue between the European and Eurasian unions on setting up a common economic space stretching from Lisbon to [the Far Eastern Russian city of] Vladivostok. Commenting on the issue of sanctions, the head of Banca Intesa and president of the "Conoscere Eurasia" ["Recognising Eurasia"] association, Antonio Fallico, says that he thinks that the sanctions are the main reason for the problems in Russo-European relations "because there has been a betrayal of trust and the many-century-long economic and cultural ties between Europe and Russia have been undermined.

"Business can and should unite our countries again." According to him, the countries of the European Union understand the importance of an economic rapprochement between the EU and the EAEU. Germany, France, Italy, Spain and Greece are increasingly applying efforts to achieve a rapprochement between these economic unions. "Russia and the Eurasian Economic Union are Europe's natural and organic partners, both in geopolitics as well as in the economy. Our adversaries are not only terrorism, drug trafficking or uncontrolled migration, but a mentality, according to which there is a country which has obtained the right to be the world's policeman in some incomprehensible manner," he stressed.

According to a survey, 80 per cent of the major Western companies working in Russia are not experiencing any particular difficulties in their operations as a result of the sanctions. The CEO of the Association of European Businesses, Frank Schauff, said this when sharing his conviction that economic ties between Europe and Russia will continue throughout the period of the sanctions being imposed.

"It is now the second year that we have been living with sanctions, and I do not rule out that in a little while everyone will soon have forgotten the initial reason for them," Tatiana Valovaya joked in response. When the Russian Federation joined the World Trade Organisation [WTO], the Americans had to revoke the Jackson-

Vanik amendment [to the 1974 Trade Act]. The reason for this amendment had already been forgotten. And every time at the negotiations the Russian delegation was forced to recall that it was introduced against the USSR, which was preventing its citizens from emigrating to Israel. The USSR has long gone, Israel recognises that all is in order with emigration, but the amendment was only revoked in 2012."

In the opinion of Valovaya, the reasons for the sanctions are the lack of support for the idea of a common economic space put forward by Russia in 2003. 

If this project were to be implemented, the EEC minister believes, subsequently Ukraine, which is at the junction of two parts of the Eurasian continent, would not have to choose between them. Cooperation with both parts of the continent is equally important to Ukraine. "Therefore I think that the sooner we set out on that path, the sooner we shall be able to sort out this situation," Valovaya expressed her viewpoint.

A letter from European Commission President Jean-Claude Juncker to the Russian president [Vladimir Putin] was read out, in which he proposed getting closer trade ties going between the EU and the Eurasian Economic Union, should the truce be observed in Ukraine. He said that he had proposed to European Commission officials that they should study the possibility of a rapprochement between the EU and the EAEU. Moreover, the vice-president of the Association of Italian Entrepreneurs, Vittorio Torrembini, who communicated the letter, confidently stated that it serves as an indicator of the influence exercised on Brussels by Poland and the Baltic states.

True, Tatyana Valovaya did not agree with him in her conversation with the Regionplus correspondent, in which she shared her impressions of the meeting with representatives of the many European countries' business communities, among them those from the Baltic States. "All the states of the European Union are beginning to understand that it is very important for their economic interests to cooperate with the Eurasian Economic Union. Both we and Europe have many problems in common, and this is not only the threat of terrorism. So, political common sense should act as an incentive to economic cooperation," she said, after adding that Juncker's letter is naturally a good thing, but the EEC is waiting for an official sign from the EU that it is ready for dialogue.

The countries of Europe needed more than 30 years to set up the European Union. But it cannot be said now that that the association does not have its weak spots and that its future is a cloudless one. Over this period there have been quite a few publications in the Western press prophesying its imminent demise. It has moreover been decided to devote a separate session of the World Economic Forum in Davos [Switzer-land] in January 2016 to the European Union's attitude to the EAEU. They would certainly not waste time discussing a non-existent project.