Marriage of Sanctions Convenience: Russia Rethinking the EAEU Role
Russia commences its presidency in the Eurasian Economic Union (EAEU) in 2023. The very fact of any state presiding in an integration association is important, since it gives this nation a chance to articulate its priorities, aligning plans of various initiatives with its own needs, etc. However, Russia, which has been in economic war with the Collective West for more than a year, sets much more ambitious and large-scale objectives within the Union’s framework—from establishing a Eurasian rating agency to achieving “genuine independence and self-sufficiency” in the realm of technology. These objectives go far beyond 2023 and, by definition, cannot be fulfilled within a single calendar year. This is why it would be more appropriate to review the priorities of the Russian presidency in the EAEU, outlined by the Russian president back in December 2022, in a broader strategic context.
Previously, despite the abundance of official statements and documents, the EAEU played a peripheral role in Russia’s foreign policy, and the Union’s practical value for Moscow was highly questionable. Now, the Union is becoming an important tool for Russia to heighten its resistance to sanctions, reducing technological and financial dependence on the West and fostering foreign trade with friendly nations.
Hitching the wagon to industrial and technological sovereignty
Russia’s significant dependence on mechanical engineering imports as well as components and intermediate consumption goods from Western markets requires long-term import substitution programs for those products, along with technological sovereignty as long as this remains rational in terms of long-term inter-industry efficiency and economic security. Among the mandatory requirements for such programs are clearly defined timeframes and criteria of efficiency, as well as medium- and long-term rise to the world level in terms of making or manufacturing competitive products geared for export (after the domestic market is saturated).
In the midst of restrictions on imports of industrially manufactured products and technologies from unfriendly states, Russia needs to establish alternative supplies from its partner countries, as well as to set up parallel import channels, to ensure more systematic use of the transit capacity of its EAEU partners, especially given that national import substitution programs are not yet fully operational. At the same time, in the year of Russia’s presidency and in subsequent years, it is crucial for Russia to avoid legalizing the parallel import mechanism at the EAEU level. Otherwise, it might lead to an even greater politicization within the association, which would face natural resistance from other member states.
To facilitate parallel imports, two main areas of intervention seem feasible. The former entails building diversified logistics channels to install uninterrupted supply chains. This implies the establishment of foreign trading houses in the EAEU nations, which can serve as a safety net, as well as extending the business chain of new intermediaries from third countries that have refused to impose sanctions. The latter is to create direct and tangible benefits for the Union’s partners, which can outweigh the potential risks.
Importantly, the more active the EAEU countries are helping Russia circumvent Western restrictions, the greater their vulnerability to the U.S. and EU sanctions pressure will be. In the future, the range of these risks will only expand, with Russia having to take a more scrupulous approach to maintaining a balance of interests in its dialogue with the partners. For example, amidst the current global energy and food inflation crises, as well as rising global interest rates, Russia can offer commodities, food and debt refinancing on more favorable grounds to the EAEU member states in return.
No dollar, no problem?
The imposition of tough financial sanctions on Russia, including the disconnection of some national banks from SWIFT, is causing significant losses for the nation’s finances. This is due to the fears of real sector companies, banking and financial institutions from friendly states of being “hit” as well as the technical difficulty of conducting financial transactions or entering into commercial transactions denominated in USD and EUR with sanctioned banks and businesses in Russia.
These risks are critical when addressing Russia’s objectives of restructuring import and export flows, as they can actually block cooperation within the EAEU. In this regard, there is a growing demand for an anti-sanctions financial infrastructure with regional development institutions and national regulators of the EAEU member states involved to cooperate with Russia under lesser risks. For example, in the form of building a Eurasian payment system, more active connection of central banks from friendly countries to the Central Bank’s financial messaging system (CFMS), developing a network of mutual correspondent accounts between Russian and foreign banks in national currencies.
In early March 2022, the Asian Infrastructure Investment Bank (AIIB) and the BRICS New Development Bank (NDB) announced the suspension of transactions to Russia and Belarus. The decision of the financial institutions to freeze their lending to both countries is the clear evidence of the growing pressure on global financial institutions, which may have a negative impact on Russia’s participation in infrastructure projects.
In this tough environment, it is critical to provide alternative mechanisms for investing in infrastructure projects and to replace the dropout investment of international institutions. This can primarily be achieved by strengthening cooperation within the EDB (Eurasian Development Bank) by strengthening the pool of national foreign exchange reserves both within this institution and in partnership with third countries – China, India and ASEAN.
Free trade zones: from figures to results
The priorities of Russia’s EAEU presidency in 2023 and, more broadly, Russia’s vision for the Union over the next 5-10 years would be incomplete without an updated strategy for trade and economic ties between the association and its foreign partners. It is no coincidence that Vladimir Putin specifically emphasized the importance of expanding the geography of EAEU’s international contacts and concluding new preferential agreements in his January address to the heads of EAEU member states. A logical sequel was the approval in February 2023 of the EEC action plan for the implementation of Russian priorities. These include building a systematic dialogue with major partners, such as the SCO, ASEAN, CIS, MERCOSUR, and updating the guidelines for the EAEU’s global and regional positioning.
Even though the latter point does not directly affect external relations, it logically fits into the overall strategy of the Eurasian Economic Union and Russia, especially when it comes to deepening partnerships under new circumstances. Obviously, even with the potential success of Eurasian integration inside this club, it is impossible to strengthen the position and status of this association in the outside world without recognizing and creating a clear “success story” with major regional players – countries of Southeast Asia, Latin America, Africa and the Middle East.
Since the EAEU’s launch, Russia’s participation in the Union has been bolstered by the external circuit of collaboration, as exemplified by signing of the FTA with Vietnam in the inaugural year of the EAEU and a series of other deals in the subsequent years. However, in the first five years, the target-setting mechanism for such agreements was distinctly quantitative by nature, largely due to the Union’s youth and lack of experience. The focus on quantity increasingly overshadowed the quality of agreements. The logic of that process can be succinctly summed up in a formula—the more preferential and other deals with partners, the better for the overall KPI of Eurasian integration. In the meantime, Russia and other EAEU member states have often been artificially chasing nice figures of trade turnover within the FTA framework.
In the current environment, one should not count on solid figures with all partners in the negotiation track or a sharp and, most importantly, stable and dynamic increase in trade turnover. Moreover, an FTA is no guarantee of a multiple increase in trade turnover, as can be evidenced by the agreement between the EAEU and Vietnam. Although it has led to the expected surge in mutual trade with Russia immediately after its ratification, it has failed to achieve the announced goal of $10 billion by 2020. It is not sanctions or financial pressure from the West on Moscow or Hanoi that are most detrimental, but rather the poor logistics and transport links between the two nations. On the whole, the positive economic effects for Russia from the agreements concluded so far are minimal or non-existent due to the framework nature of the deals stricken, as in the case of the trade and economic agreement between the EAEU and China.
Finally, it is important to understand that the corridor of opportunities for the EAEU to conclude trade agreements with third countries has narrowed. This primarily concerns the countries that have joined anti-Russian sanctions. One example is Singapore, a nation that signed a preferential agreement on goods with the EAEU in 2019, with an eye to further conclusion of an FTA on services and investments with each member state separately. Yet, after the introduction of restrictive measures against Russia, the promotion of the FTA with Singapore is likely doomed to failure. A similar scenario awaits the relations with South Korea, which has shown interest in concluding an FTA with the EAEU at various stages, even entering negotiations with Russia on services and investments in 2019.
Russia groping for new points
In the current situation, the target-setting mechanism of trade agreements for Russia, especially the FTAs within the EAEU, should, by definition, change—and it might focus on three main functions.
The first is offering privileged conditions for the imports of critical products to Russia, such as electronics, semiconductors and equipment. Already now, some EAEU partners can substitute the imports of goods dropped out due to sanctions in certain categories. For example, Vietnam is capable of replacing Taiwan as one of the largest suppliers of microelectronic circuits and IC chips to Russia. This could be an argument for Moscow to lobby for the revision and updating of the existing agreement with Hanoi within the EAEU.
The second is the expansion of export channels to divert Russian products that are no longer in demand in Europe to new markets. The main product categories include oil, gas, coal, steel, as well as fertilizers and agricultural products. The latter is particularly relevant for most regions of the world in terms of food security in the face of global shocks.
The third is the formation, via a network of FTAs, of new regional entry points and hubs, each capable of performing a specific function depending on the regional specifics. In the Middle East, the UAE could become a financial and technological hub, while India could play the role of an economic hub in South Asia, and Mongolia could play the role of a transport, logistics and infrastructure hub in North-East Asia.
Previously, such an entry point was Singapore, through which Russia sought to integrate more closely into key economic and technological processes in Southeast Asia and, more broadly, in the Asia-Pacific. With sanctions imposed, this role is likely to be reassigned to Indonesia, with which an FTA is scheduled to be signed within two years. In the year of its presidency, Russia is likely—for political, economic and reputational reasons—to try to step up negotiations with Jakarta, aspiring to reach a somewhat advanced stage in the relations with its Union partners by late 2023.
With the Collective West seeking to exclude Russia from global economy and trade, technological sovereignty, alternative financial mechanisms and foreign relations within the EAEU become a more significant tool for Moscow to make up for sanctions losses and to get adapted to external shocks. Therefore, it can be assumed that Russia will be more enthusiastic and pragmatic in its approach to building ties with its partners in the Union in the foreseeable future. At the same time, one should not harbor any illusions: for Russia, the EAEU is one of the tools, whose skillful use will only partially help address some of the most sensitive problems.
From our partner RIAC
Brick By Brick, BRICS Now a New Bridge for a New World
Measuring BRICS in single decades, in 2001, BRIC started as an acronym for Brazil, Russia, India, and China; Goldman Sachs economist Jim O’Neill claimed that by 2050 the four BRIC economies would come to dominate the global economy. So South Africa was added to BRIC in 2010. The following countries are now expressing interest in joining: Afghanistan, Algeria, Argentina, Bahrain, Bangladesh, Belarus, Egypt, Indonesia, Iran, Kazakhstan, Mexico, Nicaragua, Nigeria, Pakistan, Saudi Arabia, Senegal, Sudan, Syria, the United Arab Emirates, Thailand, Tunisia, Turkey, Uruguay, Venezuela, and Zimbabwe. Is this now the awakening of BRICS+ or BRICS power?
BRICS+ by 2030 will add dozen new members and carve new indices, and by 2040, it will lead to new intellectualism on geopolitics and socio-economies for the super complex 2050 age of smart living.
Historically, BRICS nations pushed on their people-power agenda over super-power titles. They made extreme value-creation economic models over focusing on powerful military-industrial complexes. They focused on nation-building and avoided special mandates to manage global affairs. They have been on a quest to upgrade them. They were feeding hungry mouths, as they were population rich, constantly up-skilling, and improving value creation as they were SME rich. They kept a steady watch to create multilateralism to uplift humankind.
They, too, made mistakes, as did the rest of the world
In the third decade of the third millennium, come 2020, three transformations erupted. First, futurism changed the rules on the ‘physicality of work’ and created a new imbalance with the ‘mentality of performance’; this has divided the workforce of world; the old system of over a billion commuting daily to the center of a complex maze to arrive daily at the sanctum of the company and create climate change. So now, in response, some 50% of the world’s workforce has chosen to stay away and work remotely in the surroundings of wide-open choices. Furthermore, technology uplifted micro-power-nations and exposed Western economies now stripped naked in bubble baths on slippery floors, they tippy-toe practicing conga-lines
Newly magnified economy: Behold, what microscopes exposed the magnified inner workings of the body. Similarly, the integrated networks have exposed the digital connectivity and working of millions of villages, cities, and nations with additional billions of people to interact, trade, improve grassroots prosperity and create a well-informed and opinionated citizenry. Some 100 years ago, if only 1% of the world’s population knew what was happening, today it is a dozen times more, and by 2030 double again. Why would these numbers change the global economic matrix when translated into micro-trading, micro-manufacturing, and micro-exporting? International opinion today is already strong enough to crush any national opinion of any nation still lingering under the illusion of a self-promoted victory.
When the SME sector already exists within each nation, the global markets are always hungry for good quality goods and services, and the rains of almost free digital technologies make such transformation a quick turnaround. Therefore, mindsets are critically essential; the need to define the difference between the job seeker mindset that builds the organizations and the job creator mindset that originates and creates that organization in the first place.
So what are the lessons, key features, and blueprints in sight?
Mistakes and new lessons: Last many decades, as the new world was rising, Western citizens felt like China experts, and their regular visits to local China towns restaurants in each city misguided them that Laundromat trained Chinese could only produce some chicken fried rice. Ever since the advent of the camera, the East was always projected as poor and dysfunctional; mesmerized by the media coverage during the last many decades, the West was equally convinced that India, a land of only snake charmers and fakirs, finally someday speak better English. The general perceptions about Asia, besides eating rice, if they could ever make cheaper products for the West. The rest is history, mistakes, and lessons.
After the big ding-dong nights of 2000 New Year’s Eve, today’s new story starts from the 20th chapter. Now China and India alone have created some 500 million new entrepreneurs, not by a magic pill or meta-crypto-wand but by National Mobilization of Entrepreneurialism, a slow, painful deployment of SMEs across the nation, and by creating mobilization protocols to identify, classify, and digitizing based on multiple factors from type and size to the evaluation of their “respectable” role in future communities and economic factors. This methodology was far more advanced in strategy and stern management over the globalization frenzy from the West, where sudden exporting of manufacturing of the industrial plants to kill manufacturing and destroying the middle class out of the West already declared globalization a great success.
The other mistake is to assume this is an economic or an academic study, at best, like an Oscar Slap on sleepy rotundas occupied with endless printing of money across the Western economies. Instead, this is an entrepreneurial response for the entrepreneurial nations to awaken hidden entrepreneurial talents in up-skilling SMEs and re-skilling manufacturers at national levels.
Recommendations and warnings: No airline can survive with only Flight Engineers and Frequent Flyers stuffed inside the cockpits; that space is only reserved for highly trained pilots. Henceforth, across the world, any economic development of any size, shape, or authority may find other more suitable alternate paths of occupation if they still cannot demonstrate any levels of understanding, applicable skills, or mobilization mastery on the National Mobilization of Entrepreneurialism to up-skill exporters and re-skill manufactures and uplift national SME sector as the most prominent economic contributor of the nation. Study the biggest error of economic thinking
Underestimating the hidden powers of early thinking and starting a tiny unknown SME is a mistake of mindsets; here, entrepreneurialism like a saga unfolds, like a voluminous piece of literature but demanding literacy, understanding the job seeker mindsets and the ability to differentiate with entrepreneurial job creator mindset is already winning half the battle. Study the Mindset Hypotheses
Nations failing to realize the power of the billion SME rising in Asia and still unable to declare a national agenda of national mobilization of SMEs now must acquire an understanding of the 4B Factor: a billion displaced due to the pandemic, a billion replaced due to technology, a billion misplaced in wrong jobs now a billion on starvation watch. Furthermore, this 4 billion ever digitally connected mass of people ever in the history of humankind is now the most significant force of global opinion. Notice nations are already intoxicated with joy over the popularity of their national public opinion while having just an opposite international opinion on the world stage.
Recommendation; everyone is born an entrepreneur; our system chips away at this talent. Nevertheless, 10% to 50% high potential SMEs of any nation once are identified, classified, and digitized within 100 days. The uplifting digital platforms of up-skilling exporters and re-skilling manufacturers will result in 10% to 50% quadrupling their performance, productivity, and profitability. Imagine how much-regimented efforts will activate a positive national economic revolution based on real value creation, uplifting grassroots prosperity. How soon is a nation ready for a significant change? The rest is easy.
Promoting Economic Security: Enhancing Stability and Well-being
The stability and well-being of people, communities, and countries are critically dependent on economic security. It covers a range of topics, such as access to necessities, work opportunities, stable incomes, and defense against economic shocks. The need of guaranteeing economic security has increased significantly in the modern world, which is characterized by technical developments, geopolitical shifts, and unexpected disasters. The importance of economic security is examined in this article, along with important tactics for promoting adaptability and preserving people’s quality of life.
The value of economic security to individuals, communities, and countries cannot be overstated. By fostering an atmosphere where people and families can achieve their basic needs without suffering undue stress, it promotes stability. Because of this stability, people can recuperate and start over after severe shocks like economic downturns, natural disasters, or health crises.
Furthermore, economic security contributes to social cohesion by reducing inequality and fostering inclusivity. When individuals feel economically secure, they are more likely to actively participate in society, contribute to their communities, and engage in productive endeavors. This sense of security leads to greater social harmony and a collective feeling of prosperity.
Moreover, economic security is vital for long-term sustainable development. It enables individuals and societies to invest in education, healthcare, infrastructure, and innovation. These investments drive economic growth, improve overall well-being, and create the foundation for a prosperous future. By ensuring economic security, countries can build resilient and sustainable economies that benefit their citizens and contribute to global progress.
To enhance economic security, several key strategies can be implemented. Firstly, governments and businesses should prioritize diversifying their economies by promoting sectors with growth potential and resilience. By reducing reliance on a single industry or market, countries can mitigate the impact of economic downturns and build a more robust and diversified economy.
Investing in education and skills development is another crucial strategy. Governments and organizations must focus on providing quality education, vocational training, and lifelong learning opportunities. Equipping individuals with the necessary tools and knowledge enables them to adapt to changing economic landscapes and remain competitive in the job market.
Strong social safety nets are necessary to protect people during times of economic upheaval. The most disadvantaged populations should be given priority in the design and implementation of comprehensive social welfare systems by the government. Creating a safety net for all citizens entails implementing programs for income support, healthcare coverage, and unemployment benefits.
Promoting entrepreneurship and innovation can create new opportunities for economic growth and job creation. Governments can support aspiring entrepreneurs by providing access to capital, mentorship programs, and favorable regulatory environments. Embracing technological advancements and fostering a culture of innovation further enhances economic security, particularly in an increasingly digital world.
International cooperation is essential since economic security is a global issue. Cooperation between nations is necessary to advance ethical business practices, lessen economic inequality, and improve financial stability. Initiating discourse, coordinating policy, and assisting nations in economic crises are all important functions of multilateral organizations.
Societies can improve their economic security and create a more secure and prosperous future by putting these strategies into practice: diversifying the economy, investing in education and skills, creating social safety nets, encouraging entrepreneurship and innovation, and fostering international cooperation.
Having economic security is crucial in a world that is uncertain and changing quickly. Governments, corporations, and individuals may all work together to create an environment that promotes economic security by putting a priority on stability, resilience, and inclusivity. We can create a more resilient and prosperous future for everybody through diversity, education, social safety nets, entrepreneurship, and international cooperation. By making investments in financial stability, we build a more just and sustainable world.
The Impact of Globalization on the South Asian Economy
Globalization refers to the process by which economies, societies, and cultures from different countries become integrated with one another. The economies of the countries that make up South-East Asia, which include India, Pakistan, Bangladesh, Nepal, and Sri Lanka, have been significantly impacted by the spread of globalization in recent decades. The effects of globalization on the economies of South Asian countries have been mixed, with some positive and some negative results.
Positive Impacts of Globalization on the South Asian Economy
The expansion of South-East Asia’s trade and investment opportunities is one of the aspects of globalization that has had the most positive impact on the region’s economy. Because of its large consumer base, low labor costs, and strategic location, the region has become an attractive destination for foreign investors. As a consequence of this, the level of foreign direct investment (FDI) in South Asia has significantly increased, which has led to the development of new industries and the production of new jobs.
The expansion of the service industry in Sout-East Asia can also be attributed to the effects of globalization. South Asian countries have emerged as a hub for the outsourcing of services such as information technology (IT) and business process outsourcing as a result of the emergence of new technologies and the increased availability of skilled labor (BPO). As a direct consequence of this, the area has benefited from an increase in both the number of available jobs and the amount of money it brings.
Last but not least, globalization has facilitated greater cultural interaction and integration throughout South-East Asia. The region possesses a significant cultural legacy, and the advent of globalization has made it possible for South Asian music, films, and cuisine to become popular all over the world. This has not only contributed to a greater awareness of the region’s cultural heritage, but it has also opened up new doors for the travel and hospitality industry.
Negative Impacts of Globalization on the South-East Asian Economy
Even though there have been some positive effects, there have also been some negative effects that globalization has had on the South Asian economy. The widening gap between rich and poor is one of the most pressing problems that we face today. The advantages brought about by globalization have accrued almost entirely to a relatively small number of people, which has contributed to a widening income gap. As a consequence of this, social unrest and a wider gap in incomes have emerged.
Another significant obstacle that has been presented is the displacement of workers and traditional industries. Due to the effects of globalization, many smaller businesses have been forced to shut down, and their employees have been relocated to larger companies that are more productive. As a consequence of this, there has been an increase in unemployment as well as social unrest, particularly in rural areas.
Globalization has contributed to the deterioration of the environment in South Asia. The region has seen a growth in industries such as the textile industry, both of which have had a significant impact on the environment as a result of their expansion. The population’s health and well-being have suffered as a direct result of environmental degradation, which can be traced back to the increased consumption of natural resources and the improper disposal of waste produced by industrial processes.
The economy of the South-East Asian region has been affected in both positive and negative ways by the phenomenon of globalization. While it has resulted in the growth of industries and increased cultural exchange, it has also resulted in the displacement of workers and the widening of income inequality. While it has contributed to the growth of industries and increased cultural exchange, it has also resulted in the displacement of workers. In order to address these challenges, policy interventions that foster inclusive growth, protect the environment, and create new opportunities for the population will be required. By acting in this manner, countries in South Asia will be able to take advantage of globalization’s positive aspects while mitigating some of its more damaging effects.
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