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Azerbaijan, Armenia and the Eurasian Economic Union: A Risky Game or an Opportunity?

Azerbaijan, Armenia and the Eurasian Economic Union: A Risky Game or an Opportunity?

No. 3, Jan.-Feb. 2017 » UNCOVERstory

The regional economic integration within the globalized world has been recognized as an important driver for economic growth and job creation. Hence, free trade is one of the essential points for future regional economic development that would lead to a more productive and competitive economic structure. In this respect, the Eurasian Economic Union, which came into force in 2015, aims to establish a single regional market with the elimination of all customs barriers between its Member States. Even though a number of Post-Soviet countries have already become members of the EEU, Azerbaijan has managed to maintain its neutral position in this regard. 

Standing apart

Azerbaijan has been among the countries most reticent to engage in integration projects among the Post-Soviet states. In fact, since it regained independence in 1991, Azerbaijan has actively resisted various efforts to integrate the country into various organizations or military blocks.

Over the past two decades, Azerbaijan has been among the countries most reticent to engage in integration projects among the Post-Soviet states. In fact, since it regained independence in 1991, Azerbaijan has actively resisted various efforts to integrate the country into various organizations or military blocks. Since then, it has taken a neutral position towards regional countries and almost all neighbourhood countries. With this prior stance in mind, it should not come as a surprise that Azerbaijan has rejected the invitation of Russia to join the Eurasian Economic Union. At the same time, the negative rhetoric or statements towards Moscow-led initiatives in the Post-Soviet region are in a state of decline. Today, Azerbaijan is at the centre of three major integration initiatives – the European Union, the Eurasian Economic Union (EEU), and the Belt and Road Initiative (BRI) project orchestrated by China.

Analysts have pointed to benefits as well as drawbacks that membership in the Customs Union and the Eurasian Union would bring to Azerbaijan. These analyses are practically unanimous in noting that the negatives outweigh the positives. Even semi-official Russian analysts have acknowledged this, with one noting that “if Azerbaijan joins the EEU, then it will only be together with Turkey because of the nature of the Azerbaijani economy, and this will not happen soon”[1].

Azerbaijan is at the centre of three major integration initiatives – the European Union, the Eurasian Economic Union (EEU), and the Belt and Road Initiative (BRI) project orchestrated by China.

The Eurasian Economic Union that was created by Russia in 2015 in order to maintain its influence in the Post-Soviet region and achieve various geopolitical goals, consists of Russia, Armenia, Kazakhstan, Kyrgyzia, and Belarus. Unlike its counterparts from the Commonwealth of Independent States (CIS), Azerbaijan was quite reluctant to join the new institution, despite the benefits and perspectives that were promised beforehand. The benefits of Azerbaijan joining the Customs Union would essentially lie in greater access to the Russian market. Given that the Eurasian Union would bring free mobility of labour, it would in theory, legalize the Azerbaijani guest labourers in Russia. Besides that, citizens of Azerbaijan would be eligible to live, work, and study in any Member State of the Eurasian Economic Union.

Moreover, the advantage of Azerbaijan’s accession to the EEU would be the likely increase in trade turnover. The increased trade turnover would also increase the income generated by exporting companies[2]. Namely to say, Azerbaijan’s IT, construction, and transportation sectors would highly benefit from entry into the union. There are also ambiguities – Azerbaijani agricultural products and seasonal fruits would have an easier access to the Russian market; however, the agricultural productivity of Azerbaijan is much lower compared to Russia and Belarus, in which the agricultural sector has long historical traditions. Therefore, the accession of Azerbaijan to the EEU (Customs Union) would have a negative impact on Azerbaijani agriculture. Moreover, the accession of Azerbaijan to the EEU will not likely increase the Russian influence in the South Caucasus.

The major concern and disadvantage for Azerbaijan in the Eurasian Economic Union is that the membership in the EEU requires a uniform internal energy policy among members with other non-member countries. This would prevent Azerbaijan from pursuing a balanced and independent energy policy and strategy towards its long-term partners (in particular, the EU).

The major concern and disadvantage for Azerbaijan in the Eurasian Economic Union is that the membership in the EEU requires a uniform internal energy policy among members with other non-member countries. This would prevent Azerbaijan from pursuing a balanced and independent energy policy and strategy towards its long-term partners (in particular, the EU). Therefore, this point is unacceptable for Azerbaijan, which has, to date, controlled its own energy policy towards other regional countries, as well as the EU countries. Needless to say, in the wake of a deep crisis in the international energy market, Azerbaijan continues to seek ways to diversify domestic market, as well as energy supplies, in order to boost the country’s economy.

Should Azerbaijan join the EEU, the various internal regulations will definitely limit Baku’s strategic relations with other countries. As was stated by Foreign Minister Elmar Mammadyarov – “currently, Azerbaijan's membership in the Eurasian Economic Union is not on the agenda, and no such proposal was received from the organization's members”[3]. The minister pointed out the impossibility of locating Azerbaijan in an economic and customs union with Armenia occupying the territory of the country[4]

Armenia’s Eurasian Dilemma 

Armenia was the first South Caucasus country on track to enter the future Eurasian Economic Union (EEU). In early September 2013, President Serzh Sargsyan announced that Armenia would join the EEU, the Russian-dominated economic zone, throwing away years of negotiations with the EU as part of the Eastern Partnership for an Association Agreement[5]. Although the EU accounts for 30% of Armenia’s trade turnover, the growing Armenian dependence on Russia is evident in almost every sector of society. Besides that, Moscow has a military agreement with Armenia for the stationing of Russian troops at Gyumri for the next 49 years. Seemingly, Armenia’s inability to pursue independent economic policy has significantly slowed its democratization process.

Today, in Armenia, the country in the South Caucasus that is the most dependent economically on Russia, the public, the expert community and various political forces are still discussing the practicability of membership of the country in the Russian-led Eurasian Economic Union, and Collective Security Treaty Organization (CSTO). Although Armenia is a member of these organizations, the deteriorated situation in the Nagorno-Karabakh region during April 2016 revealed serious systematic problems between Armenia and the EEU, as well as the CSTO.  Some members of the EEU, such as Belarus and Kazakhstan, have unexpectedly expressed their support for Baku during the four-day war, stressing the need to restore the territorial integrity of Azerbaijan.[6]

No doubt, such strong statements from the nominal allies of Armenia are contrary to the commitments of the Eurasian Economic Union and other multilateral structures. Therefore, according to the president of Armenia Serzh Sargsyan, the behaviour of Kazakhstan and Belarus dealt a serious blow to the reputation of the Eurasian Union and the project itself[7].

Thus, there appears a question, why did the Armenian authorities decide to join the Eurasian Union? 

A losing wager

According to Richard Giragosian, director of the Regional Studies Centre based in Yerevan, Armenia is “in grave danger of becoming little more than a Russian garrison state, marked by significant overdependence on Russia and, at times, political submission to Russia’s interests.”

Armenia, which has had its borders with Turkey and Azerbaijan closed for almost three decades, is mostly worried about maintaining the safety of the country. Since Armenia has regained independence in the 1990s, the political elite of the country has not built a long-term economic strategy that would also allow to Yerevan to develop more functional and inclusive governmental institutions. In this context, it is reasonable to speculate, then, that Moscow and Yerevan are coordinating their efforts to weaken democratic movements in the region by promoting and reinforcing norms that discredit political change. According to Richard Giragosian, director of the Regional Studies Centre based in Yerevan, Armenia is “in grave danger of becoming little more than a Russian garrison state, marked by significant overdependence on Russia and, at times, political submission to Russia’s interests”[8].

Seemingly, Armenia’s membership in the EEU had the opposite effect from the one intended, as Baku wielded enough political influence over Kazakhstan and Belarus to drive them to put pressure on Russia to refrain from pro-Armenian policy during the April 2016 events. In addition to that, the membership of Armenia and Russia in the same integration bloc does not prevent the latter from exporting modern offensive weaponry to Baku. Indeed, Azerbaijan is the biggest purchaser of Russian-made weaponry in the South Caucasus.

Thus, the latest clashes in the Nagorno-Karabakh region, as well as the stagnating economy, revealed serious internal problems in the Eurasian Union, such as mutual coordination issues. Some would claim that Yerevan will likely suspend its membership in the Eurasian Union after the escalation of tensions between Member States, but it is impossible due to the Russian factor. Another alternative for Yerevan is to attempt to exert some influence in its favour over the positions of Russia and other members of the EEU, which also seems impossible for now. The one thing that is clear is that, in the aftermath of the diplomatic pressures amid military tensions in Nagorno-Karabakh, Yerevan will set new priorities for its foreign policy discourse in order to gain wider appeal and support within the Eurasian Union.

 

[1] Svante Cornell ‘Azerbaijan: Going it Alone’ URL: https://www.silkroadstudies.org/resources/pdf/publications/12-1409GrandStrategy-Azerbaijan.pdf

[2] CESD Publications: http://pasos.org/wp-content/uploads/2013/05/Azerbaijan_Membership_Eurasian_Economic_-Union1.pdf

[3] http://en.trend.az/business/economy/2474086.html

[4] Contact.az: FM Elmar Mammadyarov: Azerbaijan will not join the EEU http://www.contact.az/docs/2015/Politics/122500141583en.htm#.WMj6-vmGNPb

[5] Rikard Jozwiak, “Explainer: Can Armenia Square Its EU Goals with Joining Russia’s Customs Union?” Radio Liberty/Radio Free Europe, September 5, 2013, http://www.rferl.org/content/armenia-eu-russia-explainer/25096959.html

[6] Minval. Az: http://minval.az/news/123566910

[7] Kazakhstan Pressures Yerevan on Behalf of Baku: http://asbarez.com/123547/kazakhstan-pressures-yerevan-on-behalf-of-baku/

[8] Gayane Abrahamyan, “Armenia: Yerevan Mulls Pros and Cons of Putin’s Eurasian Union Vision,” Eurasianet.org, October 31, 2011, http://www.eurasianet.org/node/64422

 
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OEconomica No. 1, 2016