The Future of Eurasian Integration

The war on Ukraine and Western sanctions open up a new scenario for Russia. Moscow aims to create an economic space in 'Greater Eurasia'. The role of China, India Turkey and Iran. Objective: to build a new economic world free from the enslavement of the West.

Moscow (AsiaNews) - Experts from the Veb.Rf institute of the Vnešnekonombank, Russia's foreign development bank, have published a study on the conditions of Eurasian economic integration, against the backdrop of Western sanctions against Russia for the invasion of Ukraine. The analysis refers to the dimension called 'Greater Eurasia', which includes in addition to Russia also China, India, Iran, Turkey as well as smaller states, with the goal of reaching 46% of world GDP by 2035, up from 38% in 2019.

In a long-term perspective, these states can become 'the main vector of the world economy and the model for balanced development', the report states, to counteract the global GDP produced more than half today by the states of the West. Russia's partners (and Belarus, which is also under sanctions) are faced with a crucial choice, either to turn to the new conditions that are opening up for trade and financial sovereignty, or to loosen ties and turn only to the market that remains free of primary or secondary sanctions.

The experts believe that the countries of Eurasia have the resources and potential to develop in cooperation with each other 'not by numbers, but by the wisdom of choices, to form a partnership of a new kind'. This requires 'in-depth integration' on a socio-economic, humanitarian and financial level.

The shock of the sanctions is estimated at an overall loss of 8.6% of GDP for the Eurasian Economic Union (EEU), made up of Russia, Belarus, Armenia, Kazakhstan and Kyrgyzstan, by 2022, which is also reflected in various ways on the other countries of the former Soviet area; in Belarus a -6.4% is expected, and in Russia a -10%. Following the war, Ukraine's economy is expected to collapse by 35-40%.

Veb economists also predict global stagflation, a process of recession combined with inflation. There will be a sharp reduction in energy exports from Russia, however the Western political agreements on energy sanctions go, a further increase in petrol and gas prices, and in general a sharp drop in private sector confidence related to geopolitical risks. Risk premiums in the financial markets will be increased, resulting in reduced consumer spending and investment in all economic sectors. The UN economists themselves expect inflation to rise to 6.7% in 2022 worldwide, two and a half times the average indices of the 2010-2020 decade.

The next step would then be cooling markets and lower commodity prices in 2023-2024, which would particularly affect the economies of Russia and its Eurasian partners, according to the analysts. They therefore point to an alternative route in the new market to be formed in the East for trade, services, labour, communication infrastructure and a common financial space. A kind of 'Silk Road' in reverse, from West to East in the Eurasian sphere.

Russian and Chinese banks should merge into the Chinese UnionPay system, enhancing national currencies in a new payment and credit system. Customs barriers should be redefined to form a common trade space, using the geographical and administrative routes from Russia to Iran and involving cargo bases in India, Indonesia, and Vietnam, with the contribution of digital technologies and a focus on integration in the agrarian sphere, which should enhance the Central Asian hotlands.

These macroeconomic visions of the future are not limited to the dream of Greater Eurasia. According to the Veb experts, this plan would progressively involve the countries of the SCO (Shanghai Cooperation Organisation), Asean (the Association of Southeast Asian Nations) and the Brics (Brazil, Russia, India, China and South Africa), in a new economic world free from the enslavement of the West.