Central Asian infrastructure development

A general theme of SPIEF 2015 and the SCO summit in Ufa this summer was the economic collaboration and cooperation between nation states. While the focus has largely been on the collaboration between Russia and China, or Russia and India, it is important to note that Russia is also making an increased effort to form economic unions with some of its Eurasian neighbours.

The EEU, established at the start of 2015, is an economic union between Russia, Belarus, Armenia, Kazakhstan and Kyrgyzstan. Its structure is similar to that of the EU; a single market trade zone regulated by its own commission, court and bank (these are based in Moscow, Minsk and Almaty). Its integrated single market of 176 million people had a GDP of over US$ 4tn (PPP) in 2014, while the EU’s GDP was over US$ 16tn (PPP) in the same year.  Given that the EEU is a far less mature entity, and is comprised of only 5 members compared to the EU’s 28, this is a significant achievement. As well as having introduced the free movement of goods, capital, services and people across the trading zone, the EEU has also allowed common transport, agriculture and energy policies.

The union is strictly economic, avoiding political complexities and tensions. With increasing interest in economic development in the Central Asian region, and Russia’s difficulty trading with the West in the current climate, this union is more relevant than ever. Central Asia is a region that desperately requires infrastructure funding; while countries such as Kazakhstan have extensive hydrocarbon reserves, they are often lacking in more basic forms of infrastructure and goods. These needs can be met by their accession to the EEU. Similarly, Russia can import goods from its EEU partners, which is particularly significant in the current political climate.

Critics of the EEU have said that it will be hard for the initiative to thrive in the face of continuing fluctuations in the Russian economy. However, with Russia seeking viable alternatives to trading with the West, the EEU could serve as a key driver of Russian economic growth alongside Russia’s partnerships with Asian economic giants, China and India.