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The Eurasian Economic Union: Power, Politics and Trade
The Eurasian Economic Union: Power, Politics and Trade
Table of Contents
  1. Executive Summary
Report 233 / Europe & Central Asia

Water Pressures in Central Asia

Growing tensions in the Ferghana Valley are exacerbated by disputes over shared water resources. To address this, Kyrgyzstan, Tajikistan and Uzbekistan urgently need to step back from using water or energy as a coercive tool and focus on reaching a series of modest, bilateral agreements, pending comprehensive resolution of this serious problem.

Executive Summary

Water has long been a major cause of conflict in Central Asia. Two states – Kyrgyzstan and Tajikistan – have a surplus; the other three say they do not get their share from the region’s great rivers, the Syr Darya and Amu Darya, which slice across it from the Tien Shan, Pamir Mountains, and the Hindu Kush to the Aral Sea’s remains. Pressures are mounting, especially in Kyrgyzstan, Tajikistan and Uzbekistan. The population in Central Asia has increased by almost ten million since 2000, and limited arable land is being depleted by over-use and outdated farming methods. Extensive corruption and failing infrastructure take further toll, while climate change is likely to have long-term negative consequences. As economies become weaker and states more fragile, heightened nationalism, border disputes, and regional tensions complicate the search for a mutually acceptable solution to the region’s water needs. A new approach that addresses water and related issues through an interlocking set of individually more modest bilateral agreements instead of the chimera of a single comprehensive one is urgently needed.

The root of the problem is the disintegration of the resource-sharing system the Soviet Union imposed on the region until its collapse in 1991. Kyrgyzstan and Tajikistan provided water to Kazakhstan, Turkmenistan and Uzbekistan in summer and received Kazakh, Turkmen and Uzbek coal, gas and electricity in winter. The system had broken down by the late-1990s, and a plethora of bilateral and regional agreements and resolutions concluded in that decade failed to fix it. The concerns Crisis Group identified in 2002 – inadequate infrastructure, poor water management and outdated irrigation methods – remain unaddressed, while the security environment is bleaker.

Regional leaders seem disinclined to cooperate on any of their main problems. Suspicion is growing between the most directly affected countries, Kyrgyzstan, Tajikistan and Uzbekistan. Personal relations between Tajik President Emomali Rahmon and Uzbek President Islam Karimov have been icy for years, and Karimov and his ministers are increasingly prone to make bellicose statements. International partners, including Russia, the European Union (EU) and the U.S., say they can do little if the countries remain fixated on a narrow interpretation of national interests. Differences over upstream hydropower projects require intensive, high-level resolution. Though some localised efforts to improve water supply have worked, usually with donor aid, corruption has undermined more ambitious ones. Yet, the failure of the Kyrgyz, Tajik and Uzbek governments to modernise water-dependent sectors such as energy and agriculture increases their mutual dependence.

For all its complexity, the water issue is probably the one that offers some opportunity for solution. As a Swiss water specialist observed, “water can be a driver of conflict but it can also be a driver of peace”. It is an objective problem, and equitable distribution and a concomitant energy exchange would produce tangible benefits for all. Removal of the water factor from the more intractable problems of borders and enclaves, meanwhile, might mitigate conflicts and perhaps even help solve them. Improved water infrastructure and management projects could thus be crucial for building peace and political stability, while promoting development and economic growth.

Attempts at comprehensive regional solutions have foundered on mistrust. Kyrgyzstan, Tajikistan and Uzbekistan (and their international backers) should act now in the border areas of the Ferghana Valley to end the annual cycle of competition and conflict over water by dividing the water issue into more manageable portions – seeking gradual, step-by-step solutions along conceptual and geographical lines rather than one all-inclusive resource settlement. If Uzbekistan will not participate, Kyrgyzstan and Tajikistan should work bilaterally. Meanwhile, high-level mediation should be sought to address Uzbekistan’s objections to upstream hydropower projects.

There is no guarantee this would work, but it could give these three states an opportunity to modernise infrastructure and the management of water resources as well as train a new generation of technical specialists. The agreements would also set a modest precedent for other spheres in which cooperation is sorely needed and might help defuse tensions in the region, while improving the grim living conditions of most of its population.

Kyrgyzstan's President Atambayev, Russia's President Putin, Kazakhstan's President Nazarbayev, Belarus' President Lukashenko and Armenian's President Sargsyan stand for a photograph before a meeting of the Eurasian Economic Union in Astana, 29 May 2014. REUTERS/Mikhail Klimentyev/RIA Novosti/Kremlin
Report 240 / Europe & Central Asia

The Eurasian Economic Union: Power, Politics and Trade

Since its creation in 2015, the Eurasian Economic Union (EEU) has kept only a few of its promises. Its limited economic success cannot mask the many tensions between Russia and its neighbours. Much of the EEU’s future success will depend on its members’ will to shift away from geopolitics a​nd focus on international cooperation, governance, social welfare and migration.

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Executive Summary

The Eurasian Economic Union (EEU), created in 2015 by Russia, Kazakhstan, Kyrgyz­stan, Belarus and Armenia, claims to be the first successful post-Soviet initiative to overcome trade barriers and promote integration in a fragmented, under-developed region. Supporters argue that it could be a mechanism for dialogue with the European Union (EU) and other international partners. Critics portray a destabilising project that increases Russia’s domination of the region and limits its other members’ relations with the West. The EU views the project as a challenge to sovereign choices in its Eastern neighbourhood. Positions hardened after Armenia’s 2013 departure from the Association Agreement with the EU, including the Deep and Comprehensive Free Trade area, and Russia’s annexation of Crimea.

On paper, the EEU is an economic, technocratic project that offers some benefits to members, particularly in easing cross-border trade and facilitating labour migration, but also poses economic risks by raising external tariffs and potentially orienting economies away from global markets. So far it has had little economic success, though access to Russia’s labour market has been an important motivator and, on balance, a positive outcome for struggling post-Soviet economies. Beset by trade disputes, sanctions regimes and a regional economic crisis, trade inside the EEU fell by 26 per cent in 2015. But optimists argue that the legal status of labour migrants within the bloc has improved, and there will be long-term gains from harmonising customs and trade rules.

The main political tensions around the EEU, however, stem from its role in regional politics. Russia views it not only as an economic grouping, but also as a mechanism to institutionalise influence over its neighbours and as a building block in a new international order. This raises tensions with members and has led to a clash with other integration drivers in the EU’s and Russia’s shared neighbourhood, specifically the EU’s Association Agreements, including a Deep and Comprehensive Free Trade area (AA/DCFTA). Moscow views these EU initiatives as encroachment into its sphere of influence. This clash between different regional projects contributed to the tensions and conflict in Ukraine in 2014, and while Moscow argued the AA/DCFTA was harmful for its economy, EU officials saw the concern as political, stressing that EU standards are not a burden even for EU companies when exporting to Russia or cooperating with Russian companies. Both sides view the other as a rival, but EEU member states other than Russia have sought to deepen their relationships with the EU where they can.

Closer economic integration within the EEU should make conflicts between members (for instance, between Russia and Kazakhstan) less likely. Easier cross-border trade and movement could reduce tensions in Central Asia. Yet, if Russia uses the EEU to dominate the region politically and as a platform for confrontation with the West, other members are likely to view the organisation as a threat to their independence. Rival economic partnerships – whether with the EU or China – would then look more attractive, potentially creating tensions in relations between EEU members and Moscow.

The EEU’s uncertain role and future and the standoff with Russia over Crimea and eastern Ukraine, make it difficult for the EU to develop a coherent policy toward it. Some Brussels officials and member states are opposed to any talks, fearing they would legitimise Russia’s policies toward its neighbours and cut across bilateral relations between the EU and Armenia, Kazakhstan, Kyrgyzstan and Belarus – all of which have experienced new momentum in the past year and a half. Others argue that EU engagement with the EEU is a possible channel for a breakthrough in relations with Russia, or at least that it could help build bridges, or even take pressure off countries in the Eastern neighbourhood and Central Asia, some of whom have complained about being trapped between Moscow and Brussels.

Political engagement between the two blocs is hardly realistic at present, in particular until conditions such as implementation of the Minsk Agreement on the Ukraine conflict are met. While Moscow has repeatedly expressed an interest in formalising relations, many in the EU have concerns that such a step would produce a substantively empty process with an appearance of normal relations but minimal substantive gains.

If approached with full awareness of the above risks, low-level technical talks between EU and EEU officials could, however, help inform future strategies and offer some pragmatic short-term gains, at least in terms of defining substance for future discussions.

Higher-level engagement, however, should only follow serious shifts in Russian policy, both in Ukraine and in relation to other regional states, and this is highly unlikely in the short-to-medium term. The EU would also have to consider whether recognition of the EEU would enhance or undermine the ability of smaller EEU member states to define their bilateral relationship with Brussels.

Moscow/Astana/Bishkek/Dushanbe/Brussels, 20 July 2016