Russia Wants Free Trade Expansion Of Eurasian Economic Union

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Op/Ed by Chris Devonshire-Ellis 

  • EAEU Free Trade Agreement negotiations with China and India to start early 2021 
  • Potential EAEU expansion to include Indonesia & Mongolia 
  • Desire to link EAEU with China’s Belt & Road Initiative 

Russian President Vladimir Putin has announced plans to expand cooperation between the Eurasian Economic Union (EAEU) and other countries, with Putin stating that a memorandum of understanding was signed between the Shanghai Cooperation Organization (SCO) secretariat and the Eurasian Economic Commission (EEC) at the SCO summit on November 10. Our report on that meeting is here.

“We consider that to be another step towards implementation of the idea we initiated to create a large Eurasian partnership in the field of security, economic and humanitarian cooperation,” he emphasized. In this respect, expansion of cooperation with other countries and regional integrations is very important. Putin said. “The issue is first of all about linking the activities of EAEU to implementation of China’s Belt and Road Initiative.” he added.

“Expanding integration within the EAEU framework is becoming interesting for a whole number of foreign countries,” he said at a meeting of the Supreme Eurasian Economic Council held last Friday. A decision to provide observer status to Uzbekistan and Cuba was also taken at that meeting.

“An agreement on cooperation between EAEU and such economically large countries as China and India is being implemented.” Putin said. “The first round of talks on a free trade agreement with India will be held shortly, while we approve the launch of similar talks with Iran.” Putin said, adding that the idea of making preferential agreements with Indonesia and Mongolia is also welcome.

A China-EAEU Free Trade Agreement

The prospects for a Free Trade Agreement between China and the EAEU, including Russia is an intriguing one. That such a deal will occur has already been agreed in principle, with a non-preferential FTA signed in late 2018. Getting tariff reductions into such deals, and also agreed with India is a matter that will take well into 2021 to agree. However, the prognosis is good on both counts. China is looking to diversify trade and supplies away from the United States given the US-China trade war, while Russia is also looking for new markets in the advent of Western sanctions against it. Both parties have recently committed to doubling bilateral trade by 2024. A China-EAEU FTA would achieve that goal.

An India-EAEU Free Trade Agreement

An India-EAEU Free Trade Agreement is also likely. India pulled out of the Asian RCEP agreement last year, citing concerns over giving domestic market access to Chinese manufacturers. A deal with the EAEU would be far less contentious, with Russian companies unlikely to compete in India to the same extent as Chinese ones would. At the same time, an EAEU deal would open up markets in Russia and via the International North-South Transport Corridor investment India has been making with Iran and Russia, developing market potential to the West. It also allows New Delhi to show at least some success of free trade deals in the wake of the RCEP pullback.

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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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