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India Planning Free Trade Zone With Eurasian Economic Union

India has proposed creating a free trade zone with the Eurasian Economic Union (EEU*). “The question was raised by India, which is now considering a free trade agreement with the Eurasian Economic Union. This is a new level in our relationship. The possibility is being discussed,” Alexey Pushkov, head of the International Committee of Russian State Duma told reporters Friday in New Delhi, India.

The union's member states account for about 15% of the world's land mass, covering over 20 million square kilometers. Source: Wikipedia

The union’s member states account for about 15% of the world’s land mass, covering over 20 million square kilometers. Source: Wikipedia

Last Thursday TASS news agency reported that India will start negotiating a comprehensive free trade agreement with the Customs Union of Russia, Belarus and Kazakhstan within the next six months. India started working on the project last year when in November supported a proposal to establish a workshop to sign the agreement with the EEU.

The Russia-led Eurasian Economic Union has huge potential to expand and is open to cooperation with partners in the East and West, President Vladimir Putin said at the EEU summit in Moscow in December 2014.

The increase in the number of members is beneficial to the union itself. It boosts its market capacity and contributes to the strengthening of trade and economic ties, and to the launching of new investment projects,” Putin noted. [Eurasian Economic Union Is Open For New Partners, Putin Says]

Vladimir Putin and the Russian government clearly are keen on expanding their influence throughout the former Soviet space. It is fair to say that the EEU was part of a larger and more comprehensive effort to return Moscow to a privileged position of regional leadership,” BNE reported in January 2015. [The Rise And Fall Of The Eurasian Economic Union – OpEd]

The EEU is a part of a wider new global financial architecture which also includes the formation of BRICS and Shanghai Cooperation Organization (SCO).  Apart from the current EEU members which are Russia, Kazakhstan, Belarus and Armenia, the next candidate in the list on the accession is Kyrgyzstan. Later, the desire to join the EEU expressed Vietnam, Turkey and Syria.

China has also said it is willing to join a free trade zone with Eurasian Economic Union. “At first the Chinese were cautious about the Eurasian Trade Union; they just needed to make sure that it works. Now they are increasingly showing interest in participation with the union, not just with Kazakhstan, Belarus, Russia, Armenia, and Kyrgyzstan on an individual basis, but with the union per se,” the Russian Ambassador to China Andrey Denisov told RIA in an interview.

Moldova, Ukraine and Georgia have been offered by both the European Union and the Eurasian Economic Union to join their integration unions. All three countries opted for the European Union by signing association agreements on March 21, 2014. However break-away regions of Moldova (Transnistria), Ukraine (Republic of Donetsk) and Georgia (South Ossetia and Abkhazia) have expressed a desire to join the Eurasian Customs Union and integrate into the Eurasian Economic Union. [BRICS, Eurasian Economic Union (EEU), Shanghai Cooperation Organization (SCO): Towards A New Global Financial Architecture?]

What would be the significance of India, a BRIC member and the biggest democracy in the world, joining the EEU? In the following interview by Rajya Sabha TV published in January 2015, guests: Ajai Malhotra (former diplomat) ; Kanwal Sibal (former foreign secretary) ; Prof. Manoj Pant (subject expert) discus the issue in details.

*) What is the EEU?

The Eurasian Economic Union (EAEU or EEU) is an economic union of states located primarily in northern Eurasia. A treaty aiming for the establishment of the EEU was signed on 29 May 2014 by the leaders of Belarus, Kazakhstan and Russia, and came into force on 1 January 2015. Treaties aiming for Armenia’s and Kyrgyzstan’s accession to the Eurasian Economic Union were signed on 9 October 2014 and 23 December, respectively. Armenia’s accession treaty came into force on 2 January 2015. Although Kyrgyzstan’s accession treaty will not come into force until May 2015, provided it has been ratified,[15] it will participate in the EEU from the day of its establishment as an acceding state.

In 1994, President of Kazakhstan Nursultan Nazarbayev first suggested the idea of creating a regional trading bloc during a speech at Moscow State University. Numerous treaties were subsequently signed to establish the trading bloc gradually. Many politicians, philosophers and political scientists have since called for further integration towards a political, military and cultural union. However, modern-day Kazakhstan has insisted the union stay purely economic as it seeks to keep its independence and sovereignty intact.

The Eurasian Economic Union has an integrated single market of 176 million people and a gross domestic product of over 4 trillion U.S. dollars (PPP). The EEU introduces the free movement of goods, capital, services and people and provides for common transport, agriculture and energy policies, with provisions for a single currency and greater integration in the future. The union operates through supranational and intergovernmental institutions. The supranational institutions are the Eurasian Commission (the executive body), the Court of the EEU (the judicial body) and the Eurasian Development Bank. National governments are usually represented by the Eurasian Commission’s Council. In addition, all member states participate in the Collective Security Treaty Organization, an intergovernmental mutual defense alliance,” Wikipedia says.

eurasian economic union EEU

About ETFalpha

Chief ETF Strategist & Co-Founder at EMerging Equity

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