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The economic great game in Eurasia

“The collapse of the USSR is the greatest geopolitical disaster of the 20th century.”


This remark by Vladimir Putin, which left an indelible mark on my mind, was a confession that Russia had never awoken from the dream of being a “great power.”


The spirit of reintegration was always kept alive in the region in the post-Soviet period. There were even aspirations to transform the Commonwealth of Independent States (CIS), the first step toward this reintegration, into an economic project. Although the CIS formed the Eurasian Economic Community in 2000; “it never managed to become a superpower in an economic sense,” according to Putin, who made this remark in 2005.


Efforts to this end continued though, and in 2010, Russia officially unveiled the Eurasian Customs Union that also included Belarus and Kazakhstan. The project envisaged in those years was to proceed gradually and finally create the Eurasian Economic Union (EEU) that would rival the European Union.


UKRAINE WAS THE APPLE OF THE EYE    
 

The EU was not standing still either. By saying, “what happens in East Europe and the South Caucasus is also of concern to us” it started the Eastern Partnership initiative in 2009, and was trying to bring Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine into its sphere.


Putin’s anger at Europe’s game of eastern neighbors, which also resulted in the explosion witnessed in Ukraine last year, was actually due to the bearing it had on the EEU project.


The Kremlin was pressuring Kiev to keep its distance from the EU since Ukraine would be the apple of the eye for the planned union, given its human resources and developed industry. Putin’s plans were disrupted in the wake of developments that followed the protests at Viktor Yanukovych’s U-turn and shift away from the EU. The new Kiev administration, which ousted Yanukovych and looked westward, resulted in Russia becoming aggressive and annexing Crimea.


These developments, which ever since last year have generated winds that signal a new Cold War, have inevitably also dealt a blow to Russia’s economy. Russia, which has sought to avenge the loss of its potential with Ukraine, is being suffocated with newly incurred losses as a result of sanctions.


It is also clear that it is all made more difficult as the oil game continues; a game in which Saudi Arabia, a U.S. ally, holds the strings and targets Russia and Iran. As a natural consequence, Putin is expending more energy to recover these losses.


AN EPOCH-MAKING PROJECT 

During the past few weeks I have written in my column about Russia’s ongoing efforts to establish closer ties with China and Turkey to save its economy. Within this framework, a new move was made and the EEU was established as planned on Jan. 1.


The EEU, which has been termed an “epoch-making” formation by Putin, currently comprises Russia, Kazakhstan, Belarus and Armenia. This group, with Kyrgyzstan also set to join in the next few months, has a population of 175 million, a GDP of US$ 2.4 trillion and abundant energy resources. The union plans to become an integrated market allowing for the free movement of goods, services and labor, and to operate on the basis of coordinated macroeconomic policies.


Kazakh leader Nursultan Nazarbayev, who was also amongst the first architects of this idea, calls the EEU “the birth of a new geopolitical reality in the 21st century.” It is being envisaged that this new creation will not just accelerate the flow of trade amongst member states but will also be in a position to speed up the flow of trade between Europe and Asia.


IS IT A FUTILE EFFORT?

While just consisting of four active members currently, the EEU, as a geopolitical force, has the potential of reviving nostalgia for Soviet times. Despite some people saying that the EEU is a daydream, it is known that the EU has accepted it as something that needs to be tackled. We could even say that one of the dynamics behind the recent bonding between the EU and the United States is to sense such a danger in the future.


There are some questions that come to mind though…


The first is how strong and harmonious will the union be… The EEU has started life with members like Belarus and Armenia, which have small economies. It has started life deprived of Ukraine, which during Soviet times used to be the base of advanced industry and a major source of wheat. Kyrgyzstan, which is set to join later, won’t make much difference. Kazakhstan, on the other hand, has a relatively stronger profile, and negotiations are ongoing with other countries that wish to join. In addition to all this, there is palpable tension that Russia’s economic problems might spread within the bloc.


The question being asked at this stage is whether Putin’s real intention is to create a Russia-centered force rather than making major economic contributions to member states. Kazakhstan, however, is furious at such discourse, and constantly keeps repeating that the EEU is solely an economic union and no political motives are involved. It is clear that the intervention in Crimea has rattled Kazakhstan, just like it has everybody else in the region…


CHINA ENAMORED WITH REGION TOO

Another question, of course, is -- apart from the internal dynamics of the EEU -- how will it cope with external factors. Although the group contains elements that make it a rival to the EU, statements coming from Kazakhstan in particular, suggest the opposite. It was only a few days ago that we even witnessed Russia sending messages to the EU regarding cooperation.


Putting Europe aside, China will be the really difficult issue for Russia. I had previously touched upon the realignment in the power struggle and the angles of the Russia-United States-China triangle. In this context, although Russia and China have shaken hands on various topics, the possibility of the regional ambitions of both countries conflicting remains high. For both sides the road to preventing global U.S. dominance passes through Eurasia.


One of the critical questions at this stage is whether the EEU and China’s Silk Road project are on a collision course… It has crossed my mind that China’s clever placating of Russia and suggesting cooperation on this topic could potentially result in the merging of both dreams and transform it into a strong reality.


However, it also needs to be considered that China, as part of its Eurasia game, will spread investment and employment along the route it takes. Russia, on the other hand, has no such thing in mind. Regional countries, with desperate need for revival, will be confused by this and it could result in weakening Russia’s impact. Therefore I think it is important that Putin offers attractive terms to the countries in question.


If I had to summarize, I would say Russia’s efforts to create a Eurasia Bridge took a step forward on the first day of the new year with the EEU. On the other hand, a tough process awaits Putin in order to strengthen the union, and also not to lose it to its new friend China and to hegemony.


It won’t be easy. A Eurasian great game is unfolding that will determine the new balances.


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