Vladimir Putin, the once and future Russian president, made waves recently in an article he published in Izvestia about the desirability of a “Eurasian Union”, which would deepen and build upon the existing customs union involving Russia, Belarus and Kazakhstan and potentially expanding to include Tajikistan and Kyrgyz Republic. He writes:
This project also implies transitioning to closer coordination in economic and currency policies in the Customs Union and CES and establishing a full-fledged economic union…Its natural resources, capital, and potent reserve of human resources will combine to put the Eurasian Union in a strong competitive position in the industry and technology race, in the struggle for investors, for the creation of new jobs and the establishment of cutting-edge facilities. Alongside other key players and regional structures, such as the European Union, the United States, China and APEC, the Eurasian Union will help ensure global sustainable development.
(Credit: New York Times)
Putin may want the bloc to be that competitive, but the conditions for it are simply not right. Here’s how several organizations assessed the would-be member states of his Eurasian Union against some of the other markets he identifies:
The plague of corruption and bad governance alone is too great for the bloc to credibly challenge the likes of the EU or U.S., and there is no reason to believe that greater economic and political integration or internal competition within the bloc will lead to reform given that the component states all struggle with these issues similarly. Who in a Eurasian Union would be in a position to reform and encourage other members to improve their governance? It would have to be Russia given its power relative to the other states, but that is just not something the Russian government seems interested in doing.
Which brings us back to Russia and its troubled economy. Russia needs foreign investment and technology to develop its economy but is predicted to lose about $50 billion in capital flight this year out of an economy of about $2.2 trillion due to its poor business climate. In a great piece in the Financial Times, Philip Stephens blames this unfortunate situation on the backwards-looking tendencies of Vladimir Putin:
Russia is richer now, the beneficiary of soaring energy prices during Mr Putin’s first spell in the presidency. On every other economic measure – foreign investment, technology, the pattern of trade, the condition of the national infrastructure, or educational attainment – the clouds have darkened. Russia’s population is shrinking fast.
There were moments when it looked as if things might change. Dmitry Medvedev, who has kept the Kremlin warm for Mr Putin’s return, seems to have grasped the challenges of an economy defined by hydrocarbon riches, obsolete technology and capital flight. The good intentions have come to nought. Mr Putin is many things but he is not a moderniser.
Stephens rightly warns that the West should not revel in Russian decline since it would be far better off if Russia were an economically healthy and cooperative partner in global affairs. A weak Russia, he argues, will seek out new enemies to blame for its condition, sowing instability both abroad and domestically. This is an important observation because unlike the Obama Administration’s “Russia Reset” policy, it correctly identifies the internal condition of Russia and the politics of Putinism as the biggest sources of friction in the U.S.-Russian relationship, not American diplomatic style.
The takeaway from all this is that the U.S. should temper its expectations somewhat when it comes to U.S.-Russian relations. Grand concessions will probably not be returned in kind, and personal relationships are unlikely to produce meaningful benefits, but progress may continue to be possible in some areas, including commercial and security-related issues. There is room for growth from there, but that potential will depend upon how big a bogeyman Putin wants the West to be.
