2023 Trade Prospects As Russia Chairs The Eurasian Economic Union

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Dynamic EAEU growth is in sight as previous global diplomatic and trade efforts are poised to lift off 

By Chris Devonshire-Ellis  

Revolving Presidencies of regional trade blocs has meant that Russia now chairs the Eurasian Economic Union (EAEU) for the year. 2023 is an important year for the EAEU with intra-EAEU and EAEU foreign trade all growing significantly over 2022.

Also, Kyrgyzstan now chairs the Commonwealth of Independent States (CIS) from January 1, 2023, an issue I discussed here.

I highlight the EAEU trade trends, the fundamentals behind them, and look at 2023 prospects as follows:

Eurasian Economic Union

The formally trade integrated Eurasian Economic Union (EAEU), includes Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia, while also has Free Trade Partners with Iran, Serbia, Vietnam and China. The EAEU is a bona fide free trade group, with agreed tariff and trade between the entire group.

The EAEU has operated effectively since 2015. It covers an area of 20,229,248 km2 and has an estimated population of 184.6 million. The EAEU encourages the free movement of goods and services, and provides for common policies in the macroeconomic sphere, transport, industry and agriculture, energy, foreign trade and investment, customs, technical regulation, competition, and antitrust regulation. Provisions for a single currency and greater integration are envisioned for the future.

In total, the EAEU has an actual GDP (nominal) of US$2 trillion and a GDP per capita of US$10,400. To compare, that roughly equates to an economy slightly larger than Italy with an average individual income level of Mexico. However, the sheer size of the EAEU population renders it an attractive market, and especially as it is united in trade policies and agreements.  

There have been trade problems during 2022 due to the sanctioning of the Russian Ruble. While that does not create internal difficulties as the Ruble is commonly transferable among EAEU states, it has made it difficult for other EAEU members to trade Russian Rubles received in payment for goods elsewhere. This may be about to change. An obvious solution to the multi-currency issue is the formation of a EAEU Digital Currency, probably backed by the Ruble as the lead. Discussions are being held, although a solution is unlikely to be found during 2023. Russia however is pushing ahead with trials for a Digital Ruble in April, while cryptocurrency exchanges are expected to be established in Russia from Q2. EAEU currencies are also set to be traded on the MOEX exchange from early 2023 to provide greater flexibility.

Russia can be expected to provide dynamic leadership while it is chair. It needs to boost EAEU and other Asian trade to compensate for the loss of Western markets and was active is doing so during 2022 when EAEU trade increased by an estimated 30%.

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.

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


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.


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.


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.


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.


Interestingly, 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 labor to a much richer, if stagnating, market.

Mobilization may have sapped some of Russia’s manpower and as a result, the Kremlin is facing a slight labor shortage that can only be filled by migrants from periphery countries.

More migrants also mean 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.

The Kremlin has ruled this out however, with Herman Negliad, the Deputy Head of Rosfinmonitoring, the Russian State Financial Monitoring system stating that a preferred exchange rate would “be about 73-77 rubles per dollar. A level of up to 80 rubles can be considered optimal, since with an overvalued exchange rate, manufacturers from Russia cannot compete with Chinese, whose goods are much cheaper. And at 73–77, exporters win, and the economy is developing at a good pace. At the same time, importers are not at a loss.”

EAEU 2023 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 centered 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), Egypt, Israel and the UAE in the Middle East, Bangladesh, Cambodia, Indonesia, Mongolia, 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.

Significant 2023 EAEU Developments To Be Expected

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 this clearly needs 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. Discussions 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. Russia’s 2023 Chairmanship will be designed to ensure this happens.

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