Recently, on the 95th anniversary of establishing diplomatic ties between Mongolia and Russia, Mongolian Ambassador to Russia B.Delgermaa expressed Mongolia’s interest in possibly joining the Eurasian Economic Union (EEU). Accession into the EEU could have a large impact on the country’s future economic outlook and foreign relations. Is this merely an economic integration union, as advertised, or are there political ambitions behind the union? Would the EEU help propel Mongolia into its next stage of economic development, or would it be a fast track back to Russian influence?
The EEU is an economic union between five member countries, namely Russia, Kazakhstan, Armenia, Kyrgyzstan, and Belarus. The treaty to establish the union was signed in 2014, and the union officially came into force on January 1, 2015. The EEU boasts a gross domestic product of 1.9 trillion USD and a population of 179 million people. Seen by most analysts as a way for Russia to counter the European Union, all of the member states are former Soviet states. Historically speaking, Eurasian integration began after the dissolution of the Soviet Union. As former Soviet countries had become economically weak and were undergoing massive reform, the need for economic integration arose. The prospect of a Eurasian integration union was attractive to leaders who did not align themselves with Western ideologies on development. A predecessor of the EEU was the Eurasian Economic Community. This eventually evolved to become a customs union promoting free trade by erasing the customs taxes levied on goods traveling within the union’s borders. All of this led up to the formation of the EEU.
Geographically speaking, Russia has most of its landmass in Asia. Russia has historically never aligned itself exclusively with Europe or Asia, culturally or politically, and it has positioned itself as a unique region between the West and the East, always keen on influencing and establishing a strong position in the region. Ever since the dissolution of the Soviet Union, it has been no secret that Russia has been eager to reestablish its influence on neighboring post-Soviet countries. It tried to align itself with Western ideologies in the 1990s, when the collapse of the Soviet Union was still recent and economic hardships forced Russia’s ambitious for a strong Eurasia to be put on hold. As President Putin came to power and Russia’s commodity exports increased, and Russia began to regain the influence it had lost and further alienated itself from the West.
Today, Russia is one of the world’s leading producers of oil and natural gas, and is also a top exporter of metals, such as steel and primary aluminum. This has allowed them to pursue a more active foreign policy abroad, one of which is the establishment of the EEU. Even though it is touted as an economic union, it is hard to deny that the EEU is also a component in the arsenal of Moscow’s foreign policy. The EEU is seen as a move to counter the European Union, and moreover, NATO. All the other members of the union neighbor Russia. By aligning with them in a union, Russia is able to consolidate its security. Mongolia’s accession would allow Russia to further consolidate its border security and distance itself from NATO member countries.
It is easy to see how the EEU is beneficial to Russia. The question is, how does Mongolia fit into this picture? Ever since the 1990s, Mongolia has made it clear that it was actively pursuing a third neighbor policy. This policy is in place to develop and intensify ties with countries other than its two immediate neighbors. Due to this, Mongolia has been reluctant to align itself with any military or political alliances. This has been a part of an effort to balance relations between the West and its immediate neighbors. While the EEU is described as an economic union, accession to the EEU could still be seen by the West as a shift towards Russia. The union has stated plans to further intensify integration, with the prospect of a unified currency in discussion. There is no denying that accession on the part of Mongolia would have economic benefits, opening up markets in EEU member countries and facilitating an increase in both the volume and variety of exports. The idea of a unified currency could also be beneficial to Mongolia, as the country would not have to shoulder the management of its primary currency. An EEU membership would also help quell Mongolia’s dependence on China and create more balanced trade turnover. There are clear advantages that come with accession, however, it is important to look at the other impacts as well.
The EEU might offer the benefits of a unified market, a more integrated and cooperative region, and it could potentially offer more stability for Mongolia’s trade. However, we must remember the possible repercussions of becoming a member. Economically speaking, the EEU is not as strong as it seems. A collective gross domestic product of 1.9 trillion USD and a population of 179 million people seems like an ideal union at face value. But delving deeper, it is clear that Russia is the backbone of this union and shoulders the majority of the heavy lifting. Of the collective GDP and population, 1.6 trillion USD and 143 million of its people belong to Russia. The next biggest contributor to the collective GDP is Kazakhstan, which has a GDP of 420.6 billion USD. In fact, Russia and Kazakhstan are the two major economies in the union.
Unlike the European Union, which has four major economies (France, the U.K, Germany, and Italy) the EEU is driven by only one major player. Even then, the Russian economy is fairly volatile. Since the export of commodities is a major component of the Russian economy, it leaves it vulnerable to boom and bust cycles. Recent low oil prices and Western sanctions have put an even larger strain on the economy. According to EurasiaNet, “Intra-EEU trade tumbled 26 percent and members spent an average of 10-15 percent of their sovereign reserves defending national currencies that are wilting under the pressure of falling oil prices and Russia’s souring economy.” Looking at the current situation, if Mongolia becomes an EEU member, there is no guarantee that trade with other EEU members will increase. If an economic union cannot fulfill its most important role, there is little incentive for membership.
Moscow’s vision for the EEU is of an integrated union similar to that of the European Union, with a unified parliament and currency. This has caused the other members, particularly Kazakhstan, to be wary of the initiatives that Moscow has begun to act on. In particular, that anxiety relates to “serious disagreements about widening, both in economic terms, towards a monetary union, and political terms, over the inclusion of institutions such as a parliament, that might signal a political agenda,” according to Dr. Rilka Dragneva-Lewers, an expert on regional integration, EU external policy, and legal reform from Birmingham Law School. These types of moves show that Moscow might have more than economic integration in mind. This could be a troublesome sign for Mongolia, which recently announced its permanent neutrality at the UN General Assembly.
Looking at all the information shows us that becoming an EEU member right now could potentially bring more problems for Mongolia than solutions. It would be more beneficial for Mongolia to strengthen cooperation with EEU member countries rather than fully dive in and become a member. Specifically, more comprehensive economic relations with Russia without political strings attached would be better both in the short and long term.