A Re-Set Of Global Geopolitics Is Occurring: The Eurasian Economic Union Is Part Of This And Is Going Global

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Op/ed by Chris Devonshire-Ellis

The EAEU as an alternative to Europe is fast becoming a trade reality

Russian Foreign Minister Sergey Lavrov said last week that ‘tens’ of countries in Africa, Latin America and Asia are interested in negotiating Free Trade Agreements with the Eurasian Economic Union (EAEU).

Lavrov said “The EAEU s attracting more and more new participants. Uzbekistan and Moldova have become observers, while Tajikistan is considering it. The interest is no less beyond our region. The EAEU has already signed agreements with several countries, including Serbia, Singapore, and Vietnam. And an interim agreement has been signed with Iran. Negotiations are also underway with such, one would think, not exactly harmonious partners as Egypt and Israel. There are several dozen countries on all continents, including Africa, Latin America, and Asia, interested in the establishment of a Free Trade Area, or that have signed other preferential agreements with the EAEU”.

My view is that this is going hand-in-hand with a shift of global geopolitics. The United States and NATO are pulling out of Afghanistan in three months’ time, leaving this core Central Asian country in the hands of an Asian destiny for the first time in decades. With China building infrastructure and both Beijing and Moscow heavily involved in regional diplomacy with interested parties such as Iran, Saudi Arabia, Pakistan and India, the onus is now on Beijing and Moscow to deliver regional peace and security. That already appears to be happening with developments within the Shanghai Cooperation Organisation concerning both these issues, which I further discuss in this article.

At the same time, developments in the UK and in Brussels this week appear to suggest that NATO and the United States may be looking at securing markets closer to home; the European Union, and a much-needed infrastructure development push into Latin America. I discussed this scenario with Bob Savic, a senior research fellow at the Global Policy Institute here.

Developing trade with the EAEU makes complete strategic sense when viewed in the context of securing and developing a post-US Afghanistan. The country is an observer nation to the EAEU and if peace can be secured, would be an obvious candidate for full membership – it sits in the middle of Central Asia. Getting proposed infrastructure such as the Trans-Afghan Railway in place and developing Special Economic Zones – one is being developed near the Pakistan border with Kabul – would encourage regional peace via trade. As such, it becomes vital that the EAEU as a trade and investment bloc succeeds.

I have discussed recent Free Trade negotiations between the EAEU with China, CambodiaEgypt, and Indonesia in the past. What is generally less well known is that discussions to enter into EAEU FTA are also underway on a truly global basis. In Latin America, this includes the members of the Andean Community, including Bolivia, Colombia, Ecuador, and Peru. Argentina and Chile are both negotiating a deal, while Brazil and the other Mercusor nations of Paraguay, Uruguay and Venezuela are involved in talks. Mexico has stated it views a FTA with the EAEU “with high importance.”

In Asia, and the ASEAN region, Singapore has signed a deal and in late 2019 Prime Minister Lee Hsein Loong stated he believed a full FTA between all ASEAN states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) and the EAEU should occur. In fact, Vietnam already has an EAEU FTA while also in ASEAN, Cambodia, Indonesia, and Thailand are all in negotiations. The Philippines has stated interest.

In East Asia, South Korea has stated it wants a fast-track FTA deal, while both Japan and Mongolia have stated they will discuss the concept.

In South Asia, Bangladesh, India and Pakistan are all holding negotiations, while Iran signed off a provisional three year trade deal in 2018 and is about to renew this.

In MENA, Egypt has negotiations well under way, while Morocco signed an MoU with the EAEU in late 2017. Tunisia has also been holding discussions.

Elsewhere, Greece has held discussions and is being assisted in obtaining an FTA by Armenia, Israel is negotiating, Jordan has an MoU while the Lebanon are also holding talks.

These are significant developments with a global reach. While not all will come to fruition in the short term, others will, and should China be able to complete its tariff reduction discussions with the EAEU, others may well come on board sooner rather than later.

There are trade benefits in doing so. Although Russia is a sizeable manufacturer, and the largest member of the EAEU, it does not have the massive export push of competitive products that frightens so many small-medium sized countries when it comes to free trade with China. The EAEU then sits in a comfort zone, offering less domestic intrusion to manufacturers in other countries, while at the same time offering access to an EAEU market of close to 180 million, a sizeable prize for many of these smaller nations.

Such agreements also work for Russia and the EAEU; able to partner with new investors, exchange products and technologies and helping settle down a Central Asian region with new infrastructure being put in place, and new consumers happy to be involved in trade rather than on-going conflict.

The Eurasian Economic Union is therefore emerging as a major regional and to some extent global pillar for peace and regional prosperity. That keeps terrorism at bay, secures an entire continent and reduces the risk of violence in Asia’s regional cities and capitals.

It also opens considerable new investment and trade opportunities. With the European Union increasingly now a closed shop, the Eurasian Economic Union is poised to become the next new darling of international free trade for those who cannot enter Europe. Investors should begin to make plans.

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About Us

Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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