Integration zeroed out sanctions: how the EAEU developed after 2022
The level of trade integration of the EAEU countries has increased significantly after 2022. The four members of the economic bloc (Belarus, Kyrgyzstan, Kazakhstan and Armenia) have become a much more important source of supplies for Russia, as the importance of the Russian market for them has increased. But the opposite is also true. During the webinar "How the macroeconomics and trade relations between Russia and the EAEU countries have changed", conducted by Expert RA, they talked about what happened to trade relations within the EAEU, how often the ruble began to be used in calculations and how the conjuncture of recent years has affected the overall economic growth rates in the union. Details can be found in the Izvestia article.
The new architecture of Eurasian flows
The transformation of the structure of foreign economic activity after the introduction of large-scale anti-Russian sanctions turned the Eurasian Economic Union from a formal platform for economic rapprochement into an important protective circuit. The compression of traditional import channels has forced Russian businesses to look for alternative suppliers, which has led to a sharp increase in supplies from partner countries of the Union.
According to Expert RA, the EAEU countries have become a key source of supply for the Russian industry with equipment, electrical equipment, appliances, metal products and specialized industrial materials.
Somewhat more unexpectedly, exports from Russia to other states of the Union have also increased, and this flow has also undergone changes. The main increase in Russian supplies to the Union states was accounted for by metallurgical products, chemical compounds, foodstuffs, intermediate industrial components and certain categories of consumer goods. At the same time, the strengthening of the positions of Russian suppliers occurred unevenly, facing fierce competition from China and Turkey, which also seek to occupy the vacant niches.
The degree of involvement in trade with Russia varies from country to country. Kyrgyzstan has demonstrated a deep export reorientation, for which the Russian market has become an almost non-alternative sales destination. On the contrary, Armenia and especially Kazakhstan were able to maintain a more diversified structure of foreign trade relations, while continuing to actively interact with third countries.
Ruble standard
The logical consequence of the deformation of the financial infrastructure and the disconnection of Russian banks from Western systems was the accelerated displacement of the US dollar and euro from mutual settlements within the EAEU. The Union's space has become a key testing ground for payment systems in national currencies. The main burden here was borne by the Russian ruble, whose share in mutual settlements reached historical highs.
The share of the Russian national currency in paying for exports from Belarus reached 72%, while Kyrgyzstan's figure was fixed at 70%. The only major exception remains Kazakhstan, where the US dollar continues to dominate the structure of export revenue (78%), which is mainly due to the raw material nature of Kazakhstan's supplies to foreign markets.
As for import payments, the Russian currency also holds a strong position. Belarus pays for 57.7% of its purchases in rubles, Kazakhstan - 27.5%, and Kyrgyzstan — 16.3%. The rest of the import payments are diversified through the use of the Chinese yuan and national currencies, the share of which is steadily growing against the background of infrastructural risks.
Thus, the EAEU has de facto formed an autonomous settlement circuit, protected from external sanctions pressure and allowing to minimize the costs of currency conversion.
Good, but not enough
The macroeconomic results of recent years demonstrate a significant acceleration in the dynamics of the region's development. Systemic changes in the external environment forced the Union states to mobilize internal resources.
According to Sergey Ulatov, Deputy Chairman of the Board of the Eurasian Fund for Stabilization and Development (EFSD), economic growth in the EAEU countries has doubled since 2021 compared to the previous five years.
"This also applies to Russia," he emphasizes. — In many ways, this may seem strange, because the quality of macroeconomic management in all our countries has increased in recent years, and the situation has become more predictable for businesses.
Nevertheless, this growth is accompanied by the persistence of deep structural distortions. Experts say the main negative factor is that the key industries of the Union countries are still focused on exporting added value outside the Eurasian space, instead of creating internal production chains.
"All EAEU countries export added value outside the region," the source notes. — For example, the main added value in Kyrgyzstan goes to Switzerland. It is clear why — gold production. First of all, you should develop integration ties with your neighbors. If this doesn't happen, it's not a good thing.
The situation when the region's raw material resources are being processed in third countries deprives the EAEU of the opportunity to form complex domestic markets with a high share of redistribution. The countries of the Union continue to compete with each other on external platforms, instead of creating joint industrial clusters.
The main barriers to full-fledged integration lie not in the area of customs tariffs, but in the area of the quality of public administration and the underdevelopment of financial markets.
Ulatov is convinced that the key problem of the EAEU economies is of a pronounced institutional nature.
— The potential of the economy depends on the quality of institutions, — says the Deputy Chairman of the EFSD Board. — It turns out that it is much more difficult to build a road or modernize a hydroelectric power plant than to change institutions.
The second limiting factor is the critical underdevelopment of financial markets in the countries of the Union outside of Russia. Investors in Armenia, Kazakhstan, or Kyrgyzstan are denied access to complex long-term financing tools within their national jurisdictions. According to the expert, there is essentially no insurance market in these countries, let alone stock exchanges.
The dominance of the state in the investment process leads to a decrease in the efficiency of resource allocation. In the absence of developed equity markets and insurance instruments, large projects are financed either directly from budgets or through state-owned development banks, which reduces the flexibility of the economy and increases fiscal risks.
Переведено сервисом «Яндекс Переводчик»
