Eurasian Economic Union

Eurasian Economic Union

Updated February 22, 2018
Eurasian Economic Union
Figure 1. EAEU Member Countries
the EAEU’s integration efforts through regional lending
and investment programs.
Economics or Geopolitics?
The EAEU boasts a combined GDP of $1.5 trillion and
represents a market of 180 million consumers. Initially, the
Union achieved some important milestones by reaching a
provisional agreement on common border regulations and
establishing a CET regime. At the same time, the bloc has
faced challenges advancing many of its critical goals, such
as the development of a shared energy market.

Some observers suggest the Union’s issues are common to
Source: Graphic by Hannah Fischer at CRS.
all trade blocs. Other analysts argue the EAEU’s challenges
are related to the Union’s political dynamics, especially
Background
Russia’s outsized role in determining the organization’s
The Eurasian Economic Union (EAEU) integrates several
direction. For example, in 2016, Russia imposed trade
post-Soviet states into an economic union. Established in
restrictions on Ukraine without the consent of its EAEU
2015, the EAEU includes Armenia, Belarus, Kazakhstan,
partners. Such unilateral actions made evident the power
Kyrgyzstan, and the Russian Federation (Russia).
imbalance within the EAEU.
Country Membership
The EAEU largely was a Russian-backed initiative, and it
grew out of previous regional integration efforts, including
The three largest EAEU members (Russia, Kazakhstan, and
the Commonwealth of Independent States, the Eurasian
Belarus) negotiated the EAEU and its predecessor treaties
Economic Community, and the Single Economic Space.
over the course of the 1990s and 2000s. Armenia agreed to
Perhaps the most significant precursor to the EAEU was the
join the CU and eventually the EAEU in 2013; Kyrgyzstan
Customs Union (CU). Established in 2010, it included
signed an accession agreement in 2014. Moldova became
Russia, Belarus, and Kazakhstan. It led to a common
the first Observer member of the EAEU in April 2017.
external tariff (CET), tied to Russia’s own tariff rates, as
Tajikistan is also considering membership.
well as plans to develop a common customs policy. The
Trade Agreements
EAEU emerged from the CU in 2015, but with two
An EAEU Free Trade Agreement (FTA) with Vietnam
additional members: Armenia and Kyrgyzstan.
entered into force in 2016. Several other countries,
The EAEU eases cross border trade and labor migration,
including China, India, Iran, Mongolia, Singapore, and
and aims to eliminate non-tariff trade barriers among
Turkey, have expressed interest in establishing FTAs with
member states. Like the CU, the EAEU has a CET and, as
the EAEU. Probably the most significant of these would be
of the start of 2018, a common customs code. The rates are
an EAEU-China FTA, which could enable Chinese goods
relatively high, but the CET was expected to decrease on
to transit duty-free across Eurasia to the borders of the EU.
average from about 10.9% in 2012 to 7.9% in 2020, in part
An agreement could also lead to even greater Chinese
because of Russia’s accession to the World Trade
investment in Eurasian logistics and infrastructure.
Organization (WTO). In addition, Kazakhstan, Armenia,
Russia
and Kyrgyzstan have received a number of temporary
exemptions to the CET related to their own WTO
Russia is the dominant member of the EAEU. It has around
75% of its total population and over 85% of its total GDP.
membership commitments.
However, only 5% of Russia’s total trade is with EAEU
The EAEU is governed by several institutions. The
member states.
Supreme Council comprises heads of state, including
Russian President Vladimir Putin. The Inter-governmental
According to observers, Russia pushed for the creation of
Council convenes prime ministers, and the two-tiered
the EAEU to entrench its influence in neighboring states
Eurasian Economic Commission is the organization’s day-
and to increase its international standing. Russia was—and
still is—mindful of EU influence and its possible expansion
to-day decision making body. An EAEU court is tasked
with managing disputes, but its mandate is limited. Two
into Eastern Europe, as well as China’s increasing influence
other institutions, the Eurasian Development Bank and the
in Central Asia. In recent years, Russia has tried to give the
Eurasian Fund for Stabilization and Development, support
EAEU a more political, and not just economic, character,
but other countries—especially Kazakhstan—have resisted.
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Eurasian Economic Union
EAEU members also have used their membership as
an Association Agreement with the EU, which Armenia
leverage to extract economic concessions from Russia.
ultimately rejected. Some observers believe Russia
threatened to re-consider the Russian-Armenian security
According to observers, Russia’s unilateral actions, like its
alliance, which Armenia depends on given its unresolved
sanctions on Ukraine and other states, undermine the
territorial conflict with Azerbaijan.
credibility of the organization. Still, many EAEU members
rely on Russia’s energy resources, security protections, and
Armenia does not share borders with the other EAEU
labor market. Some observers suggest that member states
members, and it was a member of the WTO when it joined
accept the need for membership in the EAEU but are not
the Union. Even though it had existing WTO obligations, it
entirely committed to its success.
was expected to match the EAEU’s tariff schedule. To
smooth the transition, Armenia received exemptions from
Kazakhstan
the EAEU, granting it a longer timeframe to harmonize its
Kazakhstan plays an important role in the EAEU. It
tariffs.
occupies a strategic location rich in natural resources.
Kazakhstan, however, has had challenges in harmonizing
In September 2017, several Armenian parliamentarians
its tariffs with CU and EAEU rates. In 2010, when the
proposed leaving the EAEU. They said the Union was
country joined the CU, it had to raise its tariff rates, causing
holding back the economy and complicating trade deals
an estimated 0.2% loss in real income per year. In 2015,
with other countries. In December 2017, Armenia signed a
when Kazakhstan joined the WTO, the country lowered its
Comprehensive and Enhanced Partnership Agreement with
tariffs. As a result, many of its tariff rates are below those
the EU. The deal does not include a free trade agreement,
of other EAEU members. This has led to the establishment
however, due to Armenia’s EAEU commitments.
of mechanisms to prevent the re-export of certain goods
from Kazakhstan. The Kazakh government pledged to
Kyrgyz Republic (Kyrgyzstan)
harmonize its tariff rates, but talks are not expected to take
As one of the poorest and least developed countries in the
place until 2024.
EAEU, Kyrgyzstan has not fared well as a member state.
Prior to joining the EAEU, it was a major re-export hub for
Kazakhstan also is concerned the EAEU will limit its other
western-bound Chinese goods. It has also been a WTO
trade relationships, particularly with China, and it has been
member since the 1990s. In the wake of EAEU entry, the
wary of Russian efforts to increase its influence through the
country’s re-export business has faced major declines.
EAEU. Some observers say that the Kazakh government
views the Union as an institutional check on Russia.
Observers note that Kyrgyzstan’s decision to join the
EAEU was influenced by the country’s dependence on
Kazakhstan has been in trade disputes with other EAEU
remittances from migrant laborers in Russia. The World
members. In October 2017, it tightened border controls with
Bank estimates that, even with Russia’s economic
Kyrgyzstan and barred dairy imports from Kyrgyz
downturn, remittances made up 30% of Kyrgyzstan’s GDP
companies after then-Kyrgyz President Almazbek
in 2015.
Atambayev said Kazakhstan was meddling in Kyrgyzstan’s
elections.
Table 1. EAEU Member Statistics (current USD)
Belarus
Per Capita
External
EAEU
Belarus has participated in all Russian-led economic

GDP
Income
trade
trade
integration efforts since the fall of the Soviet Union.
Russia
$1.3 tr.
$9,720
$429.6 bn.
$26.8 bn.
Belarus receives several benefits from its close relationship
to Russia. In July 2017, Russia approved a $700 million
Kazakhstan
$133.7 bn.
$8,710
$48.3 bn.
$3.9 bn.
loan for debt restructuring. Russia also supplies almost all
of Belarus’ oil and gas at
Belarus
$47.4 bn.
$5,600
$24.4 bn.
$11.4 bn.
discounted prices. Belarus then
sells refined oil products in Western Europe at a profit.
Armenia
$10.6 bn.
$3,760
$3.6 bn.
$393.9 m.
President Alexander Lukashenko has often threatened to
leave the EAEU when Russia seeks to impose higher
Kyrgyzstan
$6.6 bn.
$1,100
$3.5 bn.
$445.5 m.
energy prices, but Belarus has limited options and relies on
Sources: World Bank (2016), Eurasian Economic Commission
Moscow’s economic support.
(2016). Per capita income indicates GNI per capita, Atlas method.
External trade refers to total trade with all non-EAEU countries.
Other issues have caused tensions between Russia and
Belarus, particularly Russian counter-sanctions on
Edward Y. Gracia, Research Assistant
Belarusians’ re-export of goods from the West (mostly food
Wil Mackey, Research Assistant
products). This resulted in stricter controls and threats of
Jennifer M. Roscoe, Research Assistant
Russian-imposed bans for non-compliance.
Cory Welt, Analyst in European Affairs
Armenia
IF10309
In 2013, Russia reportedly pressured Armenia to join the
CU—and in turn the EAEU—when Armenia was finalizing

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Eurasian Economic Union

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