2022-23 Eurasian Economic Union Trade & Investment Profile

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The EAEU comprises Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan and has Free Trade Partners with Iran, Serbia, Vietnam and China and more countries poised to join. We examine the current status of EAEU trade and investment.      

By Constantin Duhamel with additional text by Chris Devonshire-Ellis


What Is The Eurasian Economic Union (EAEU)?

Initially a Customs Union, the EAEU announced it would take the form of a common market in 2011. Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia currently make up EAEU member states. Tajikistan is a candidate member, while Uzbekistan (a member up until 2011, and considering rejoining) and Moldova (an observer) have a formal relationship with the EAEU. It has a combined population of 167 million and a GDP of about USD5 trillion.

The EAEU differs from the other ex-Soviet trade bloc, the Commonwealth of Independent States (CIS) in that while all EAEU members are also CIS nations, the EAEU has a formal, multilateral free trade agreement status between them, and as an institutionalized body can enter into free trade agreements with other countries or trade blocs. The CIS nations are a looser arrangement where members have negotiated bilateral trade agreements among themselves. This ability of the EAEU to enter into FTA with other countries is starting to make headway; an initial FTA with Vietnam has proven a success, while both Iran and Serbia also have FTA with the EAEU. Interest in the bloc is growing and future expansion is likely.

The Eurasian Economic Union

Not Just Another Russian Project

Often referred to as another form of Russia’s control of its former Socialist satellite states, the EAEU is an economic project that was first formulated by Kazakh president Nursultan Nazarbayev in 1994 based on the Eurasian theories of Lev Gumilev. These theories sought to unite the peoples of the great Eurasian steppe inside a single, if heterogenous, economic bloc. Common geography – rather than common ethnicity – meant common fate and struggle, a principle rejected by Western-leaning Ukraine and Azerbaijan as well as neutral Turkmenistan. Geographically its true importance lies in the geographical space it fills between Western China and Eastern Europe, and it poised to develop, in part as a significant overland route between China, Central Asia, the Middle East (via the INSTC) and European Union.

Inspired by the European Union
The EAEU’s fundamental principles are the same as those championed in Brussels: the four freedoms of goods, services, capital and labour. The institutions are also a calque on those of Brussels: an EAEU Commission (HQ: Moscow) and a Counsel (HQ: Minsk). That said, the structure of the group is more pyramidal and heads of member states have more weight than in the EU.

(But Not as Successful)
Often criticised – especially by the West – for a myriad of inconsistent regulatory issues, the EAEU should be congratulated for the fact it is still standing despite containing economies vastly different in quality and with different foreign policy objectives – even going as far as armed conflict (skirmishes) between member state Kyrgyzstan and candidate Tajikistan earlier this year. Today, the EAEU remains a Customs Union with simplified migration rather than a fully-fledged Common Market. Another fundamental factor, or flaw, is that 80% of its economic weight is furnished by Russia – meaning any developments are likely to appear as Russian diktat rather than parties’ compromise. However, the Ukraine conflict, pressure from China and an increasing need for Russia to develop alternative trade sources have however seen Moscow start to take a more liberal view of EAEU trade and this may help in its future development.

Ukraine: A Crucial Moment for The Union
The interdependence of EAEU economies has meant that none have chosen to turn away from the project at a time of Western isolation for Russia. Indeed, the EAEU is a key vector for overcoming economic sanctions that Russia can and needs to leverage. Conversely, and due to sanctions pressure, Russia unilaterally suspended upholding the EAEU standards it had agreed to on imports in order to avoid more supply shocks, inflation and maintain demand until 01 March 2023. The bar has seemingly been set for the EAEU.

Updates to Russia’s approach at the EAEU.

Source: Russian Ministry for Economic Development. Translation by the author.

Intra-EAEU Trade in Goods

9M 2022 EAEU trade turnover statistics
USD millions Russia Armenia Belarus Kazakhstan Kyrgyzstan
Russia 2,600 39,000 25,000 3,000
Armenia 2,600 90 17 3
Belarus 39,000 90 840 81
Kazakhstan 25,000 17 840 1,085
Kyrgyzstan 3,000 3 81 1,085


Russian Influence Still Overwhelming.
With regards to foreign trade turnover, the Russian economy towers over its neighbours. Systematically the top trading partner of all EAEU countries – even those it does not share a border with – Russia’s trade with its neighbours is nearly equal to that of all other EAEU members combined (95% of ex-Russia EAEU trade flows).


Small numbers, but qualitatively important
Despite being the clear featherweight of the group with its 3 million-strong population, a USD14 billion GDP and foreign trade with the EAEU of just under USD3 billion (of which 2.6 is Russia-oriented) – Armenia’s importance is set to increase as a transit hub for goods and services to the Russian market. Indeed, per RBC the Armenian dram has been one of the best performing currencies of the year on account of extra demand from the Russian market to settle transactions in the currently unsanctioned Armenian jurisdiction. Potential for fulfilling Russian consumer needs for Western products is also likely to be fulfilled via Armenia and parallel import schemes.


The second most involved EAEU economic partner
Raking in USD40 billion in EAEU trade despite not having the same market-savvy reputation as certain countries, Belarus’ relatively unsanctioned economy and seamless integration with the Russian market has enabled it to benefit from ample trade flows.


High potential
Compared with Belarus’ 9 million population, Kazakhstan’s 19 million-strong market ought to have generated higher intra-EAEU trade figures – though perhaps the ruble’s relative strength versus the tenge on account of higher oil prices and aggregate demand for the ruble within the bloc. Kazakhstan is also a significant energy play. If and when the EAEU becomes a Monetary Union – and remove the friction and volatility inherent in having to deal with national currencies – will the Kazakh market be able to reach a nadir. Meanwhile, Kazakhstan warehouses are at record rental highs as the Kazakh market looks set to become a major hub for parallel imports to Russia.


Tagging along
Concerns as to the maturity of the Kyrgyz market for the EAEU are valid on account of its poor governance scores and its qualitative unimportance. That said, it is not the weakest member quantitively, and its role is also set to increase with the drastic rise in population the country is set to see – until a lack of resources, including water, possibly flattens the curve. Longer term, the China-Kyrgyzstan-Uzbekistan railway and the Kyrgyz-Kazakh Highway will provide easier access for Kyrgyz exports in a market that at this moment is dominated by China trade.

Strategic Trade Partners


China has a ‘non-preferential’ free trade agreement with the EAEU, signed off in 2018. What this means is that although no formal agreement on specific tariff reductions on products exists (partially due to the complexities and difficulties in having EAEU members agree), the trade area between China and the EAEU is open and negotiated on a case by case, as required basis, thus providing both the EAEU’s smaller members protection against mass China imports yet allowing strategic access when desired. China is the EAEU’s largest single trade partner, with estimates this year of USD200 billion being achieved (largely as a result of Russian energy trade).

Currently, the EAEU’s trade turnover with China during 2022 has increased by almost 30%. Exports increased by about 40%, and imports by 20%. At the same time, according to EAEU statistics for the 7 months January-July 2022, a small deficit in the EAEU trade balance with China for the corresponding period of 2021 was replaced by a significant surplus during 2022. The largest share of imports from China among the EAEU is held by Russia (more than 80%), Kazakhstan (10%), Kyrgyzstan (4%) and Belarus (3%).

As concerns EAEU exports to China in 2022, natural gas, hard coal, and processed timber are showing strong growth among the largest commodity groups, while agricultural exports, sunflower seeds and oils, rapeseed oil, tomatoes, vegetables, fruits, frozen fish, crustaceans, and poultry meat also stand out.


Iran has a temporary Free Trade Agreement with the EAEU, with negotiations continuing to make this a permanent trade deal. The turnover between the EAEU and Iran amounted to slightly over USSD5 billion in 2021, increasing by 73.5% compared to 2020. Iranian exports increased from USD1.66 billion to USD3.424 billion, while imports from the EAEU grew by 28.8% (from USD1.253 billion to USD1.62 billion. With Iran also recently signing a comprehensive energy agreement over 25 years with Russia, and Tehran, a major energy play, indicating it is prepared to provide electricity to all EAEU and Central Asian nations, the formalizing of Iran-EAEU free trade can only be a matter of time.


India has made a formal application to commence free trade negotiations with the EAEU, with negotiations commencing in mid-2017. It makes sense for New Delhi as the EAEU is unlikely to provide significant competition in the Indian domestic market in the way that China could (one reason why India exited the RCEP trade agreement) and it provides India with greater trade opportunities and access to Russian and Kazakh energy fields.

In 2020, trade turnover between EAEU member states and India amounted to USD12 billion. Russia is India’s biggest trade partner among EAEU nations, importing Indian goods worth USD$2.65 billion in 2020-21, followed by Kazakhstan (USD225 million), Armenia (USD69 million, Belarus (US62 million and Kyrgyzstan (USD38.7 million). Bala Venkatesh Varma, the Indian Ambassador to Russia, said that the creation of a free trade zone between India and EAEU would immediately boost trade turnover to USD15 billion. India and Russia have previously discussed ways of doubling trade to USD30 billion by 2025 – with India buying Russian oil during 2022 and wanting to continue developing this trade, that figure can be expected to be surpassed by the end of this year. The Ukraine conflict has slowed negotiations however a deal within the next two years is more likely than not.


Vietnam has a free trade agreement with the EAEU and is to some extent a shining example of the benefits of EAEU trade. Signed back in 2016, when trade and investment levels were minimal, the Vietnam-EAEU FTA covers more than 90% of all traded tariff lines between Russia and Vietnam, of which 59.3% have been reduced to zero. Vietnam-EAEU trade has subsequently boomed and according to figures from the EAEU, bilateral trade turnover between the EAEU and Vietnam has witnessed a rise in trade reaching USD7.8 billion in 2021. That 2016 agreement is also now being renegotiated and is set to be expanded to boost trade still further. The General Department of Vietnam Customs reported that total export-import turnover between Vietnam and Russia reached USD5.54 billion last year, including USD3.2 billion earned by Vietnam’s exports, which are mainly centred on aquatic products, fruits and vegetables. Frozen Vietnamese prawns are a now a common site in Moscow supermarkets. In return, Russia exports meat products, and especially pork – a product that EAEU members Kazakhstan and Kyrgyzstan would not provide. Other EAEU exports to Vietnam include fruits, nuts, cotton and gold.

Other EAEU Free Trade Partners and Potential Partners
The EAEU also has a free trade agreement with Serbia, although this has recently proven problematic due to EU sanctions and prohibitions on rail transit from Russia. Other countries known to be discussing FTA with the EAEU include the resumption of Uzbekistan as a full EAEU member, Bosnia & Herzegovina and Moldova in Europe (although Moldova has a recently-elected pro EU Prime Minister), EgyptIsrael and the UAE  in the Middle East, Bangladesh, Cambodia, IndonesiaMongolia, South Korea  in Asia, and Cuba and Ecuador in Latin America.

Singapore has also been negotiating an FTA with the EAEU, with this suspended at present due to objections over the Ukraine conflict. This is also likely to delay or even indefinitely suspend negotiations with other nations, and especially those closer to the United States, such South Korea. Nonetheless, there are plenty of other interested nations who can yet be expected to make their interest known.

The Eurasian Development Bank

Similar to the EU – who invests via the European Investment Bank (EIB) and historically via the EBRD – the EAEU member states and candidate Tajikistan joined forces in 2006 to set up the Eurasian Development Bank (EDB) with the aim to finance growth in the region, namely “projects with an integration effect in transport infrastructure, digitalisation, green energy, agriculture, industry, and machinery”.

The EDB is headquartered in Almaty, Kazakhstan, and has a branch in St. Petersburg with Representative offices in Nur-Sultan (Astana), Bishkek, Dushanbe, Yerevan, Minsk, and Moscow. The EDB cooperates with other international organisations, national and international development institutions, academic and civil society organisations, associations and unions to support the Bank’s activities in the member states and beyond. These include: Observer status at the United Nations General Assembly, the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG); the UNCTAD Trade and Development Board; and the International Investment Bank.

The EDB is also a member of the Kazakhstan Stock Exchange (KASE), the International Capital Market Association (ICMA), and the International Swaps and Derivatives Association (ISDA). It participates in the Multilateral Financial Institutions’ Working Group on Environmental and Social Standards and cooperates with the World Economic Forum.

The Bank’s charter capital totals USD7 billion, including USD1.5 billion of paid-in capital and USD5.5 billion of callable capital. The current investment portfolio as at 1 March 2022 totalled USD3.902 billion and the cumulative investment portfolio (including completed projects) USD$10.448 billion. A total of 84 projects are currently being financed.

EDB Activities
The Eurasian Development Bank’s activities in Eurasia include financing investment projects that help improve living standards and develop the business and financial environment in the countries by lending to state or private enterprises, public-private partnerships (PPPs), equity participation, issuing guarantees, financing private investment funds, and providing loans to commercial banks for corporate on-lending.

The Bank also implements digital transformation projects in the EAEU+ and provides financing to banks, companies, and enterprises by investing in new and ongoing projects and supporting investment projects in the pipeline. The EDB’s portfolio mainly consists of projects in transport infrastructure, digital systems, green energy, agriculture, manufacturing, and mechanical engineering. The projects that have been implemented with the EDB’s participation and financing include the following examples in terms of the type of infrastructure needs targeted by the bank.

Complete replacement of passenger railcars for Armenia’s national railway carrier

Construction of the Polotsk Hydropower Plant on the Western Dvina River

Reconstruction of the Almaty Airport terminal, construction of the Almaty Ring Road, construction of the Turkistan Airport terminal, construction of the Saryarka gas pipeline, the Smart city lighting system in Atyrau

Financing the Russian-Kyrgyz Development Fund’s targeted programmes

Construction of the MKAD Central Ring Road in Moscow, construction of the Azov Wind Farm, construction of the Western High-Speed Diameter in St. Petersburg.

The EDB has also of late taken on development of digital technologies amongst member states. The Eurasian Development Bank’s Fund for Digital Initiatives was established on 30 June 2020, with the aim of the fund being to support digital transformation in the EDB member states. The fund provides project financing and grants and supports digital projects in healthcare, trade, public governance, culture, tourism, sports, education, environmental protection, energy, data protection, transport, logistics, manufacturing, agriculture, the labour market and migration, as well as financial technology and smart cities. This has interesting connotations for Turkmenistan, a potential future EAEU member, whose plans for its capital, Ashgabat include many of these components.

The first project implemented by the EDB Fund for Digital Initiatives was the COVID-19-Free Travel mobile app aimed at allowing the free and safe movement of people among countries during the coronavirus pandemic. The app makes it possible to retrieve, store and display PCR test results and vaccination records. This technology will undoubtedly be repurposed for other banking, financial and consumer needs across the EAEU.

Overall EAEU GDP is stable as of H1 2022
Eurasian Development Bank figures show peripheral EAEU states’ GDP grew as Russia and Belarus hit recession – leading to a flat result on the period. EDB member state and EAEU candidate member state Tajikistan’s GDP rose to the tune of 7.4%. In sum, the EAEU’s economy has only reshuffled the ‘cards’ of its economic potential rather than taken a hit, distorted by limited access to Western markets and therefore demand for its goods and services.

EAEU H1 2022 GDP figures

Russia -0.5
Armenia 11.8
Belarus -4.2
Kazakhstan 3.4
Kyrgyzstan 6.3

Source: EDB


Joint Investment Projects

Size of EDB Investment Portfolio in US Dollar terms, as of November 2022

USD billions  
Current investment portfolio 4.9
Balance sheet, less provisions and discounts 3.2
Total investment in member states 13.1

Source: EBD


84 Current EDB Projects Across Member States
In theory, the EDB’s investment approach is calqued on the UN Sustainable Development Goals and ESG principles that are now industry standards in Western Capital Markets. In practice however, and in true Emerging and Developing Market fashion, the interest of member states as developing countries primes. If the Mining and Metals sector – especially coal – is typically shunned by Western lenders, that is not the case for the EDB. That said, part of the current EDB portfolio does deal with projects whose ESG-ratings would be sky-high (see below).


Example of EDB-funded renewable energy project

Source: EDB



Russia Remains an Attractive Market for Migrants
Interestingly, according to the EDB, Russia has experienced significant growth in inflow of migrant EAEU workers and remittances in the last 6 years. A variety of reasons can be conjured to explain this:

  • Despite higher GDPs in peripheral EDB countries for H1 2022, these markets are yet to reach pre-Covid heights – meaning having to turn to exporting labour to a much richer, if stagnating, market.
  • Mobilisation may have sapped some of Russia’s manpower and as a result, the Kremlin is facing a slight labour shortage that can only be filled by migrants from periphery countries.

A Stronger Ruble Could Cause Trouble.
More migrants also means higher demand for the Russian ruble, on top of capital controls (that have artificially limited the scope of the ruble convertibility) and hefty energy prices that prop up the currency. Russian exports, however, would be strongly endangered by any continued rise – this would be critical for a key exporter of natural resources such as Russia.

Overall Demand for Eurasian Goods Likely to Fall
Recession in Developed Markets and Russia’s drop in GDP are likely to put pressure on demand for Eurasian goods, though the EDB projects this as a “short-term issue”.

Progress on Use of National Currencies Within the EAEU
With its major banks de-SWIFTed, Russia is introducing a number of measures destined to boost the sovereignty and resilience of the EAEU and create its own financial infrastructure.

Increase overall use of national currencies in settlements
74% of transactions are settled using the national currencies of EAEU members states (see below). Russia would like to see other – unsanctioned – countries play a role in facilitating exchanges in the bloc. The Kazakh Tenge clearly has some potential.

Use of currencies for settling intra-EAEU trade

Currency % transactions settled
Russian Ruble 72
Belarusian Ruble 0.5
Kazakhstan Tenge 1

Increase Overall Use of National Currencies in Price Formation
Crucially, the USD and EUR are not only used to settle but also in price formation – meaning that the EAEU economies are still exposed to the Western financial system by bearing that currency risk. The EAEU will attempt to use different systems for price formation – such as a basket of goods approach – but that clearly need to be developed and will need time to be able to replace the relevance and security of the dollar or euro, if at all.

Develop Proprietary Financial Infrastructure as a SWIFT Alternative
After currency risk (price formation and settlement), the question of how to exchange financial information in a post-SWIFT world remains – the EAEU plans to deal with this in ways similar to that which Russia and India have tried by setting up a common clearing system. That said, this will be time consuming and more expensive an investment than using bank piping the West has spent decades optimizing.

Apart from setting up alternative financial settlement systems, the EAEU has already effectively dedollarized its internal trade and about 50% of its trade with China. Disussions are also underway concerning a mutual digital currency.

Future Trends
The longer-term determinant for the future of the EAEU is of course the on-going Ukraine conflict. How this is resolved and the structure of any settlement will be key to determining the future direction of the bloc. This could go in a number of directions depending upon decisions made as concerns the potential for Russian reparations, sanctions, and other trade impacting blocks, such as sanctions on railways and ports.

This largely depends on how the EAEU imagines itself, post-Ukraine. Do member states wish to engage with the West? If so, under what terms and conditions? Or do they see themselves as an alternative trade bloc? If so, which countries are likely to be amenable to free trade agreements?

An interesting feature about the EAEU has been its resilience, as well as its potential. That could in future see it morph into a bloc that also includes the current BRICS grouping – itself the subject of huge interest amongst 13 other countries all expressing interest in joining. Could they be merged with the countries involved in free trade agreement discussions with the EAEU?

Another potential marriage could take place with the Shanghai Security Organisation, another Eurasian grouping but with a larger remit than the EAEU as it also contains a significant regional security element as well as a trade mandate. China has been discussing with Russia the possibility of how the EAEU could be merged into the Belt and Road Initiative – which contains 146 countries.

The question to ask then is not necessarily how the EAEU is performing today – and with some limitations it seems to be holding its own as a regional bloc – but how it is likely to develop. Given the current changes in global geopolitics, the probability is that the EAEU is the bedrock on which a far more potentially wide reaching and strategic alliance may well be given the chance to emerge.

Constantin Duhamel is an analyst covering Eurasia. He may be contacted at 3cduhamel@gmail.com. Chris Devonshire-Ellis is the Chairman of Dezan Shira & Associates.

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