With 12 Pacific Rim nations well on their way to establishing the Trans-Pacific Partnership, and China backing a rival Regional Comprehensive Economic Partnership among 16 nations, Russia has risked falling behind with its own faltering efforts to launch an agreement in the South Caucasus region.
The Russian bid, launched in 2014 to try and counter other agreements including the European Economic Union, appears to be falling flat, at least partly a victim of the chill in relations with the west, which arguably could get worse given the growing mess in Syria that has enmeshed Russia.
The zone, known as the Eurasian Economic Union and initially consisting of Russia, Belarus and Kazakhstan, promised free trade among partners, a huge market for neighboring countries and increasing economic activity. With China hungrily seeking to add the South Caucasus to its own so-called “One Road/One Belt” initiative, Russia has been left with little room to maneuver.
Countries involved in the Union expected to distribute their goods into the new market, especially Russia itself, faster, cheaper and on a larger scale. But a year and a half since the Union was established, official statistics and ongoing economic events make it obvious that not only have expectations not been met, the situation has got worse for each country in the union, including Russia itself as the global economy has staggered and Putin’s adventurism in Ukraine has led to western sanctions.
[Here’s an interactive map exhibiting the whole economic decrease of the Union.]
Russia and the world
A major culprit in wrecking Putin’s plans is sanctions put in place by western countries over Russia’s Ukraine misadventures. The economy is also suffering from falling global oil prices and by sanctions set by Russia itself in retaliation. Given these problems, the ruble has fallen sharply against the US dollar.
Western country leaders almost certainly didn’t take into consideration the effect of the sanctions on the economies and social lives of Russia’s neighboring countries. Russian economy is huge for the region, it survives. But when Russia catches cold, as the saying goes, its satellite countries, with small markets and limited economic activities catch pneumonia.
Russia is the number one or at least second trading partner for all of the union countries and is the major consumer of their goods and products. Bank of Russia statistics from January to July show Russian imports fell by 38.6 percent – to US$94 billion. Consequently, EU countries hoping for a sizeable Russian market have been left empty-handed.
The same statistics show first-half exports fell by 28.5 percent to US$182.5 billion. The chill in relations with the United States has also had major consequences. US Commerce Department figures for the first five months of 2015 showed trade turnover between Russia and the US declined by 34 percent, or by US$3.5 billion.
Russia’s foreign trade January-September turnover was US$399.2 billion, a 34 percent decrease year-on-year, according to the US Federal Customs Service (FCS). Russian Federation exports for nine months were US$263.4 billion, down by 31.3 percent. Overall, Imports to Russia fell by 38.6 percent to US$135.8 billion.