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    June 11, 2016

    Force of Attraction: The "Eurasian Magnet" Draws New Partners from Palestine to Mexico

    June 11, 2016 - 
    Anna Garde, PolitRussia - 
    Translated by J. Arnoldski

    The Eurasian Economic Union, although a fairly young integration association, is rapidly developing. In just the past year and a half of its existence, the project has literally transformed into a center of Eurasian gravity. On January 1st, 2015, the treaty on the established of the EAEU entered into force and on as soon as May 29th an agreement on establishing a free trade zone with Vietnam was signed. With each passing day, the number of countries announcing their desire to cooperate with the union is growing. Negotiations on establishing free trade zones are already underway with Egypt, Thailand, and Iran. Pakistan, India, China, and Singapore have also expressed their interest in the project. More and more countries are being added to this number. 

    Israel: rapprochement despite close ties with the US

    Despite special relations with the United States and declarations that Russia will never replace such, relations between various countries and the EAEU are developing at an exponential rate.

    A few days ago, negotiations on the establishment of a free trade zone between the EAEU and Israel were begun. It all started with Prime Minister Benjamin Netanyahu’s routine visit to Moscow where he demonstrated his interest in the project. Last fall at a press conference, the ministry of immigrant absorption and strategic planning of Israel, Ze’ev Elkin, stated Israel's readiness to create a free trade zone with the EAEU. On this note, he stressed that such an agreement was planned to be concluded in the shorter possible time. 

    The frequent meetings of Netanyahu, the Israeli President Rivlin, and Putin are generally consistent with the statements of Israeli authorities. Abstract thoughts on the expansion of economic cooperation between the two countries have gradually moved into the sphere of concrete negotiations. And this is all thanks to the EAEU.

    Following his meeting with his Israeli colleague Russian President Vladimir Putin remarked:

    “I’m sure that the creation of a free trade zone between the EAEU and Israel would give impetus to the development of business relations. Recently, in Astana, I discussed this with colleagues of the EAEU and substantive negotiations on this matter are to be launched in this year.”

    Putin also noted that Israeli agricultural producers will expand their share on the Russian market in the near future. Experts predict a possible rise in trade between Israel and the EAEU countries of 6-8%. Although these margins might not be so huge for Russia, the country nevertheless gains the opportunity to increase investments and improve the transfer of Israeli technology. First and foremost, we are dealing with agricultural technology, the pharmaceutical industry, and the aircraft industry. 

    Israel is where Palestine is

    Following negotiations between Israel and Russia came the turn of Palestinian partners. On June 8th, the Minister of Foreign Affairs of the Russian Federation, Sergey Lavrov, stated following negotiations with his Palestinian colleague Riad al-Maliki that Palestine is also interested in the integration project. On this, Putin said:

    “Among the promising spheres we discussed today was the possibility of establishing relations and cooperation between Palestine and the EAEU. Our Palestinian friends have expressed their interest and we will support them in this.”

    One zone for two

    Incentives for expanding the EAEU have arisen not only outside but also within the organization itself. At the meeting of the heads of the CIS states in Bishkek, Kyrgyz Prime Minister Sooronbay Jeenbekov proposed to consider the introduction of a full-scale free trade regime between the CIS and EAEU. In his words, this would help strengthen trade and economic relations between the CIS and EAEU countries. 

    Experts, however, are skeptical about such statements. As the first deputy director of the “Eurasians - New Wave” Foundation and expert on Kyrgyzstan, Denis Berdakov, has noted, this is most likely a populist statement since there will be no real results from such a merger. 

    The analyst emphasizes: “The CIS and EAEU are different-paced and different-oriented integrations. The CIS is more of a cultural-educational character and allows the post-Soviet space to be linked in one way or another. But the EAEU is to a larger extent an economic integration aimed at the creation of a customs space.”

    In addition, it is difficult to explain Jeenbekov’s statement given that the CIS space already has a free trade zone. 

    Nevertheless, the unification of these projects could become an impulse for the expansion of ties in the EAEU as well as with countries outside of the organization which desire to improve the quality standards of their products. In addition, according to the expert, without an expansion of the union’s ties with countries outside of the CIS and Central Asia, the EAEU is doomed insofar as its market capacities' further development and technologization are already insufficient. 

    Across countries and continents

    The CIS is not the first integration association which has striven to work closely with the EAEU. In May 2015, negotiations began between the leaders of Russia and China on the conjugation of the Eurasian Economic Union and the “Silk Road Economic Belt.”

    According to Putin, the linking of the EAEU and “Silk Road” projects means reaching a new level of partnership and essentially implies a common economic space on the continent.

    But more than that, the EAEU is not planning to limit itself to the continent. In October 2015, the union established ties with two Latin American partners and memorandums were signed with Chile and Peru. In December, it became known that there are plans for the signing of a similar agreement with Mexico. 

    The force of attraction of the EAEU

    Of course, it is to early to talk about the distant future of the EAEU as it is has only recently come into existence. 1.5 years of integration is a kind of funny measurement. Nonetheless, the organization has already managed to display its strength.
    Over the past year and a half, the EAEU has become one of the most successful integration projects in the post-Soviet space. In this time, the union has advanced a long way in the sphere of taxation. The main policy objective at the current stage is avoiding double taxation and preventing tax evasion on income and capital. Thanks to this policy goal, the participating countries have already introduced changes to the legislation on the income of entities. They have put forth equal taxation on income for work in any country of the EAEU. 

    Of course, experts have noted many problems on the path of integration. Among them are included the lack of enthusiasm of individual participants, an uncertainty of priorities, the choice between the EAEU and EU, the dominance of political interests in the framework of economic integration, and the underdeveloped demand for investment services. Nevertheless, these factors are not always critical.

    This point of view has been supported by the Chairwoman of the Federation Council, Valentina Matvienko:

    “The EAEU is a bit more than a year old. But in this short term, five states with different levels of economic development were able to effectively cooperate in one integration association without withdrawals. Time is needed.”

    Indeed, time will tell. In an evaluation of the union, moreover, one has to take into account the crisis phenomena in the world economy which have also affected the integration of the EAEU. Nevertheless, the interest of new countries and other integration groups from the most distant continents clearly suggests that the union has good prospects. 

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