What is the Eurasian Economic Union?

Explaining the history, purpose, and political background to the Eurasian Economic Union.

Explainer Published 15 July 2022 Updated 12 October 2022 7 minute READ

Eurasian Economic Union members

The Eurasian Economic Union consists of five member states: Russia, Belarus, Kazakhstan, Kyrgyzstan, and Armenia.

What is the Eurasian Economic Union?

In theory, the Eurasian Economic Union (EEU or EEAU) is an ambitious project for economic integration in the former Soviet region. Its formal objectives are to create a common market much like the European Union (EU).

It aims to achieve this by coordinating economic policy, eliminating non-tariff trade barriers, harmonizing regulations, and modernizing the economies of its five member states.

The EEU has its own institutions, mirroring that of the EU. These include the Eurasian Economic Commission in Moscow as its regulatory body, and a Court of the Eurasian Economic Union based in Minsk.

However, the reality of integration between the five member states is cumbersome and patchy.

The Commission’s power is limited. Member states disagreeing with its judgements can appeal to other bodies, and the Commission has no power to bring a member state before the Court in a case of non-compliance. Disputes are often resolved bilaterally rather than via EEU institutions.

The type of technocratic infrastructure and common market that underpins the EU – and which the EEU sought to replicate – still does not fully exist. Generally, the ambition to progress towards a more sophisticated economic union has not been realized.

Russia is by far the largest member state and dominates the Union. This means that the trade model is a ‘hub and spoke’ with most trade taking place between Russia and each of the four other nations as opposed to between all five. This domination means that Russia is easily able to act unilaterally within the union.

A short history of the EEU

After the dissolution of the Soviet Union in 1991, Russia pursued various integration projects through the Commonwealth of Independent States (CIS) – the much weaker successor organisation to the Soviet Union.

But this was extremely problematic. Some CIS member states were interested in closer cooperation with Russia but others were not. In Ukraine, many people perceived the organization as a mechanism purely to facilitate a civilized divorce from Russia.

Other initiatives were set up outside the CIS, including the Eurasian Economic Community of 2000 with Russia, Belarus, Kazakhstan, Tajikistan, and Kyrgyzstan, and the Common Economic Space of 2003.

From around 2010 Russia began more vigorous, ambitious attempts to deliver economic partnerships in former Soviet nations.

These included the Eurasian Customs Union formed in 2010 and the Single Economic Space, established in 2012.  This activity was partly spurred by the 2008 financial crisis and partly by the EU Eastern Partnership Policy (EaP).

The EaP launched in 2009 and sought to deepen EU economic relations with its neighbouring post-Soviet states such as Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine. Russia perceived this as infringing on its sphere of influence and wanted to create an alternative, complementary economic block to the EU.

The founder states of the Eurasian Customs Union were Russia, Belarus, and Kazakhstan. Greater integration made sense for these states which were all autocracies and already strongly connected through infrastructure and trade due to the legacy of the Soviet Union.

Economic union with Russia brought expectation of political support, security guarantees, and incentives such as cheap energy.

Greater integration also made political sense, as economic union with Russia brought expectation of political support, security guarantees, and incentives such as cheap energy. These benefits allowed autocratic leaders to avoid the reforms other post-Soviet states were undergoing.

Both Belarus and Kazakhstan emphasized they sought economic and not political union. But the reality of the EEU as a Russian geopolitical project was revealed by the case of Armenia, which had been pursuing an agreement with the EU.

On 3 September 2013, after a summit meeting between President Sargsyan of Armenia and President Putin of Russia, it was announced that Armenia would join the Eurasian Customs Union instead, shortly to become the EEU.

This would see Armenia enjoy discounted natural gas supplies and the removal of duties on Russian petroleum products. Armenian activists argued the government had been pressured into joining the EEU as part of Russia’s efforts to cement its influence over former Soviet states.

Russia made a similar attempt to compel Ukraine to reject the EU in favour of EEU membership but this failed and protests saw the government of President Viktor Yanukovych ousted from power in 2014. This began a sequence of events which led to the Russian annexation of Crimea and the escalating Russian aggression against Ukraine in 2022.

The treaty establishing the EEU was signed on 29 May 2014 in Astana (now Nur-Sultan) and came into force on 1 January 2015. Armenia was admitted to the Union the day after it came into force. Kyrgyzstan also acceded to the Eurasian Economic Union in August 2015, motivated by its close economic ties to Kazakhstan and by the labour mobility provided by the EEU.

Central Asian migrants had been working in Russia for a long time, but they suffered discrimination and prosecution. The EEU provided legalized forms of labour migration for Kyrgyzstan’s workers, easing the opportunities to find work in Russia and send remittances to family at home. This labour mobility has been a relative success story of the Union. 

Recently, discussions took place about Uzbekistan joining the EEU but these have not really progressed. Since the increased Russian aggression against Ukraine in 2022, Azerbaijan has also discussed joining the EEU as the war has forced the country to acknowledge Russia is its most important geopolitical partner.

The aftermath of the 2022 aggression has made the EEU considerably more useful economically to Russia than ever before. Countries such as Kazakhstan have been instrumental in allowing it to bypass sanctions and import restricted goods.

Article part 2

Is the EEU a customs union?

The EEU can only be said to be a partial customs union as member states so often behave unilaterally. Russia has acted without consulting the union on critical economic points.

In 2014, Russia blocked agricultural imports from the EU and trade with Ukraine in retaliation for the imposition of financial and economic sanctions. Other EEU member states did not support or implement the ban. Instead, Belarus, Armenia and other nations attempted to profit from it.

And Kazakhstan entered the World Trade Organization (WTO) in November 2015 after entering the EEU, but it negotiated a tariff lower than the common EEU tariff. This means around 40 per cent of customs duties in the EEU are not harmonized.

The EEU is a fragmented customs union, characterized by Russian unilateralism and its uneasy relationship with the smaller member states.

Russia’s role in the EEU

The EEU has an important geopolitical purpose for Russia. Putin sees it as part of his drive to re-establish the Russian sphere of influence lost by the dissolution of the Soviet Union. For Russia the benefits of the EEU are mainly political.

Its trade within the Union is much smaller than with the rest of the world. Even if a perfect market with no tariff barriers were created, the impact on Russia’s economy would be minimal.

Russia has been keen to establish the Union but has not shown the same enthusiasm for the strong supranational institutions the EEU needs.

Russia sees a regional economic integration project as a necessary attribute of a great power, and as a way to counter what Putin viewed as a US-dominated, unipolar world. It would also check EU expansion into the former Soviet Union and help support pro-Russia regimes.

Russia has been keen to establish the Union but has not shown the same enthusiasm for the strong supranational institutions the EEU needs to function in a manner anything like the EU’s common rules-based regime.

This demonstrates the paradox of Russia’s efforts to increase its influence in the region. The EEU is supposed to be about economic cooperation but economic relations with Eurasian members only matter for Russia as a precursor to achieving its political aims.

As smaller economies, the other member states had different motives for joining the Union, including many existing economic, energy or security dependencies which could be facilitated by economic integration with Russia.

European Union and the EEU

The entire founding idea of the Eurasian Economic Union was that it would serve as a Eurasian counterpart, and potentially partner, to the EU. Many of its structures and institutions are modelled on EU structures and Russia has billed the EEU as a partner for the EU in a proposed free-trade zone  ‘stretching from Lisbon to Vladivostok’.

There had been considerable enthusiasm for the EEU in European nations. The hope was Russia would pursue trade liberalization through a transcontinental agreement and become a more stable, benevolent neighbour. In Germany especially, there was optimism about the EEU as a project to bring Europe and Russia closer together through trade and connectivity.

Even after Russia’s annexation of Crimea in 2014, there was support for an EU/ EEU trade agreement to ease tensions and bring Russia into useful negotiations about European security.

But some governments were concerned from the outset that the EEU was primarily a Russian geopolitical construct, with Russia using the block to act as a gatekeeper for the interests of smaller EEU member states. It was also suspected that Russia saw economic integration with the EU as primarily a route to lifting sanctions.

The Russian government increasingly saw the hand of the US behind the EU’s activities. Even before the conflict in Ukraine escalated into full-scale war, the EEU sought an economic pivot to Asia as opposed to the West.

China and the EEU

Russia, Kazakhstan, and Kyrgyzstan were already cooperating with China through the Shanghai Cooperation Organization (SCO) – a political, economic, and military alliance founded in 2003 – before the foundation of the EEU. Russia and China used the SCO to manage a strategic balance between their interests.

China also wanted to develop economic cooperation through the SCO. But when Chinese president Xi Jinping announced China’s Belt and Road Initiative (BRI) in May 2015, China was careful to acknowledge the EEU and the need to cooperate with it. There was not a lot of substance to this cooperation but it was a political recognition of the EEU’s importance.

Russia was nervous about the spread of Chinese influence through the BRI in former Soviet states Kazakhstan, Kyrgyzstan, Uzbekistan, and Turkmenistan.

The EEU was initially conceived as part of Russia’s efforts to counter China’s economic influence in the region almost as much as it was to counter the EU in western Europe.

But this balance has shifted since the Russian annexation of Crimea in 2014 as Russia’s relations with the EU and US have become more openly hostile. In May 2018, a trade and cooperation agreement was announced between China and the EEU of important symbolic value rather than real economic benefit.

India and the EEU

India has a long political history of cooperation with Russia and the Soviet Union. In December 2016 negotiations started for a free trade agreement between India and the EEU.

The talks have not progressed, as both parties are quite protectionist in their policies. India and Pakistan also acceded to the SCO in 2017, an alternative forum for engagement to the EEU.