By: Glen Johnson

In his first real adumbration of a policy trajectory for his upcoming third presidential term, PM Putin wrote in Tuesday’s Izvestiya of plans for a Eurasian Union.  The proposed union goes beyond economics, entailing “a close integration based on new values and economic and political foundation…”  The plan, combined with Putin’s past declarations of Soviet nostalgia, has fueled speculation by some of a return to a Soviet-style political and economic bloc.  Putin tried to dispel such fears, noting that the proposed structure will be modeled on Europe’s Schengen Agreement with its streamlining of trade and elimination of customs duties within the zone, to be followed by borderless migration.  The ultimate goal is full integration along EU lines, which took Europe a full forty years of similar incremental measures to accomplish.

Eurasia’s path to integration appears to be moving along a similarly slow timeframe.  The Eurasian Economic Community (EurAsEC) was formed in 2000, but made little headway in implementation of its aims until spurred by the EU’s Eastern Partnership, which sought to bring Eastern Europe and the Caucasus into the European orbit with a free trade agreement and visa-free travel without official EU membership.  Hence it was only in January 2010 that a common market with Belarus, Russia and Kazakhstan was established. A legal apparatus for adjudicating economic disputes is the next major innovation, scheduled for January 2012.

Indeed, a strong, independent and supranational jurisdictional body will be required for the union to work.  If implemented, the court and the international economic competition could partially offset a failed WTO bid, in that the main benefits will be the forced economic liberalization required for membership, rather than a substantial boost to trade per se.  An alternative to WTO accession may be what Putin has in mind.  At a Moscow investor’s conference on Thursday, Putin complained that the Georgian question is overshadowing WTO accession talks, and implied that accession would have negative effects on domestic industry.  Putin may reiterate his 2009 demand that accession be granted to the three-country customs union as a bloc, which would be unprecedented.  A strong EurAsEC could help liberalize the economy without admitting increased foreign commercial presence.  Russia is particularly insistent on this point: in 2008 it passed the Law on Foreign Investment in Strategic Sectors, according to which foreign investors require state approval to own a business in 42 strategic sectors (not surprisingly, media is considered a “strategic sector”).

Whether it can actually attract its neighbors into such a union remains to be seen.  Ukraine has been the most intransigent, even with the shift to an ostensibly pro-Russian Yanukovich presidency.  In 2009, after losing some 25% of its GDP, Ukraine nonetheless rejected a 5 billion dollar Russian aid package in favor of a much smaller offer from the EU.  The two countries are also involved in a tense renegotiation of Timoshenko’s unfavorable 2009 gas deal with Russia, which was to be binding for 11 years.  Medvedev has stated that it will reconsider only if Ukraine joins the customs union, which was met by refusal from Yanukovich, who continues to espouse a pro-European orientation.  Clearly, getting the project from a mere declaration to realization will take serious work.