Can the Eurasian Economic Union Compete with the West?

Serbia is set to sign a free trade agreement later this year with the Eurasian Economic Union (EEU), a Russian led trading bloc. As Serbia’s relationship with Brussels flounders over Belgrade’s failure to recognise Kosovo, its accession to the European Union in 2025 seems increasingly overly ambitious. Russia, meanwhile, is keen to consolidate its influence in the Balkan state.

The free trade agreement that Serbia negoitated with the EEU may be comprehensive, but it is nothing special. Belgrade already has free trade arrangements with the EEU’s most powerful members, Russia, Kazakhstan and Belarus. The agreement, which is to be inked in October, only expands Serbia’s market to Armenia and Kyrgyzstan, both small states with strained coffers teetering on the edge of irrelevancy in terms of trading potential.

If Belgrade does join the EU as planned in the next six years, it will be obliged to drop its bilateral free trade agreements. But there is no need to think that far ahead. The political significance of the agreement with the EEU is priceless, especially from Moscow’s perspective, even though it could be short lived.

The EEU was set up in 2015, consisting of Russia, Belarus and Kazakhstan. It later expanded to include Armenia and Kyrgyzstan. Kyrgyzstan was strong-armed into joining with senior politicians, reporting that they had no choice in the matter as Kazakhstan could, if it wanted to, shutter cross-border trade. Last year, Serbia’s trade with EEU members was worth $3.4 billion while trade with the EU was worth $28.6 billion.

The EEU labours under the suspicion that it is a political tool designed to look like economic cooperation, with Russia and other members firmly denying this. But at its ideological core, it is not a set of economic principles, but rather the concept of Eurasianism, an ambiguous idea first mooted in the early 20th century. Eurasianism maintains that the part-Slavic and part-Turkic culture and society of Russia and its neighbours is unique from that of Western Europe. There are several interpretations of the concept today, ranging from the hyper-nationalistic and vehemently anti-liberal, to the Russian version of ‘Make America Great Again’ whereby Moscow reasserts its regional and global clout and relevance in full Soviet-esque glory. A more pragmatic, but not as widely held, interpretation holds that Eurasian integration, especially Economic integration, is laudable on the regional level and a potential vehicle for cooperation between the East and the West.

Previous regional efforts at economic integration in the Former Soviet Union have been largely ineffective. The EEU, like precursors such as the Customs Union, is heavy on signing ceremonies and pomp, but light on results. Russian actions in Ukraine alongside meddling elsewhere have done little to persuade observers that the EEU is not a project designed to extend Russian influence. The EU is sometimes tempted, but ultimately reluctant, to lend the EEU any credibility through engagement. An organisation like the EEU could, in theory, provide mechanisms to deepen and enhance relations between the EU, its member states, and the members of the EEU. While Russia and the EU remain locked in a stand-off over Ukraine, meaningful cooperation is impossible for both sides.

Belgrade’s upcoming free trade agreement with the EEU is a symptom of ambivalence towards the EU. Deeper diplomatic and economic ties with Russia are a not-so-subtle way of signalling national sovereignty amid tensions over Kosovo’s independence. As a strategic policy direction, it is short sighted. Though Russia is an important trading partner, it is eclipsed by the EU, which is the largest economy in the world. But the lurch towards Moscow fits with the overall thrust of where Serbia appears to be going politically. It performs poorly on key indicators such as corruption, media freedom and judicial independence – all key characteristics of Russia under President Vladimir Putin.

Like elsewhere in Eastern Europe, nationalism and the nostalgia it fosters is growing. Political leaders are keen to rekindle affinities with Moscow, even if that means irritating or alarming the EU. It speaks to a domestic audience that subscribes to propaganda prevalent in the Russian-media sphere about a morally and fiscally dissolute Europe. Serbia’s current course, however, also underscores the delicate balancing act between Russia and the West that many formerly Communist countries have been compelled to negotiate since the 1990s.

From the Kremlin’s perspective, the free trade agreement with Serbia is quite a coup. It is an incursion into territory poised, however precariously, to become part of the EU club. It fans the idea of Slavic and Serbian exceptionalism. Russia is on the side of hardliners in Serbia who refuse to countenance the recognition of Kosovo. They are ready to see the current impasse militarised if necessary. In this context, the free trade agreement’s political significance is immense. Serbia’s willingness to instrumentalise tensions with Kosovo is worrisome, as is its apparent willingness to complicate its ongoing accession negotiations with the EU. For Russian this is a win-win. For Serbia, an opportunity sorely squandered.