Uzbekistan to become Observer of Eurasian Economic Union

Introduction

On March 6, the Uzbek government approved plans to apply for an observer status in the Russia led Eurasian Economic Union (EAEU). The Cabinet forwarded the proposal to the chambers of the Oliy Majlis (parliament of Uzbekistan) for discussion.¹ The proposal for Eurasian Economic Union (EAEU) membership was based on the results of an analytical and comprehensive assessment of cooperation with the EAEU carried out by a working group on economic integration appointed by the Uzbek President. The Uzbek President’s message to the parliament pointed out that public support and their interests will be held paramount while joining the EAEU.² However, there are still uncertainties whether Uzbekistan will opt for full membership in the EAEU. During his State of the Nation Address in January, Uzbek President had spoken of the inevitability of deepening the country’s international economic integration. He had also noted that most of the Uzbekistan’s international trade transits through Russia, Kazakhstan and Kyrgyzstan, and around fifty per cent of the country’s manufactured exports go to the same countries.³

The EAEU arose out of Kazakhstan’s Founder President Nursultan Nazarbayev’s idea of regional integration of Central Asia in 1994. In a speech at Moscow State University, he had suggested creation of a ‘Eurasian Union’ as regional economic and trading bloc to connect and avail benefits from growing economies of the other parts of the globe. With the demise of the Founder President of Uzbekistan Islam Karimov in 2016, there has been speculation about Uzbekistan’s joining of EAEU under the leadership of new President Shawkat Mirziyoyev. The Union was officially established in 2015 by Russian Federation, Kazakhstan and Belarus and also included Kyrgyzstan and Armenia. Also, Moldova holds an observer status in this regional grouping. Russia has been for long persuading Uzbekistan to join the EAEU, but Islam Karimov’s isolationist policies had put paid to any chances of this being done. With the demise of Karimov and taking over by a new regime in Uzbekistan led by Shawakat Mirziyoyev, Tashkent is moving towards path of regional integration⁴ Russia shares more warm and friendly relations with Uzbekistan under Mirziyoyev. With a population of around 35 million people, Uzbekistan could probably become the second largest consumer market in Eurasian region after Russia, if it joins EAEU.⁵

Benefits of Joining EAEU

The first reason is that Uzbekistan is looking for markets to export its products and the majority of its trade partners are EAEU members. Uzbekistan registered an increased volume of trade with EAEU countries by sixty percent in the past three years. It is also projected that these figures will grow further. Secondly, Uzbekistan, as a part of a larger market, will become more attractive for investors who will consider it a launch pad to the markets of other EAEU countries. Thirdly, Tashkent will benefit from reduced transportation costs through the EAEU countries, through which eighty percent of Uzbekistan’s goods are exported currently. According to estimates, 220 million USD can be saved, and its transit capacity could be increased from 7 million to 16 million tons. Furthermore, EAEU membership can bring relief to 2.3 million Uzbek migrants working in EAEU countries (mainly Russia and Kazakhstan). Also, the cost of thousands of tons of crude oil that Uzbekistan imports each year from the EAEU countries could go down. ⁶

However, there are some apprehensions about Tashkent joining the EAEU, especially among the intellectuals in Uzbekistan. They are mainly concerned about the changing global perception of Uzbekistan in case it becomes full member of Russia dominated EAEU. America has already expressed its concern about it when US Secretary of State Mike Pompeo visited Uzbekistan in February 2020. If Uzbekistan becomes a member of EAEU, it will undermine the prospects for US economic engagement with Uzbekistan. Further, it will also boost Russia’s geopolitical leverage in Central Asia vis-a-vis USA. Uzbekistan holds an observer status in the World Trade Organization (WTO) and is also eyeing full membership. Joining EAEU might create problems in the process of Uzbekistan’s accession to WTO. Keeping all this in mind, Uzbekistan needs to be watchful once it becomes an observer of EAEU. However, it all depends on the trade and economic leverages that Tashkent would be availing through this organization which would ultimately become the deciding factor for President Mirziyoyev to consider a full membership of the EAEU.

Implications for India

Uzbekistan is the second largest trade and economic partner of India in Central Asia after Kazakhstan. In 2019, the total trade between India and Uzbekistan is estimated around 328.14 million USD, which is 0.04% of India’s total trade.⁷ The primary reason behind the low volume of trade between the two countries is the lack of direct connectivity. India has been consistently trying to reduce this insufficiency by investing in multimodal connectivity projects such as Chabahar Port and International North South Corridor (INSTC). India is also in a process of signing a preferential Trade Agreement (PTA) with EAEU anytime soon. It will potentially increase India’s economic engagement with the Eurasian region. Uzbekistan being an observer of the EAEU, would certainly add up to the India’s collective efforts to enhance its trade with Central Asian countries. Russia is also pushing Tajikistan to join EAEU, which if happens would enlarge the prospects of Eurasian integration.

Endnotes

1. Tatyana Kudryavtseva, ‘Uzbekistan to join EAEU as an observer’, 9 March 2020, Bishkek, 24.kg news agency. https://24.kg/english/145846_Uzbekistan_to_join_EAEU_as_an_observer/ [3]
2. ‘Issues of cooperation between Uzbekistan and the Eurasian Economic Union were discussed’, 6 Marh 2020. https://uza.uz/ru/society/obsuzhdeny-voprosy-sotrudnichestva-uzbekistana-i-evroaziatsk-06-03-2020 [4]
3. ‘Uzbekistan to join EAEU as observer’, Eurasia Diary, 8 March 2020. https://ednews.net/en/news/economy/420234-uzbekistan-to-join-eaeu-as-observer [5]
4. ‘Uzbekistan Commits To EAEU As An Observer Nation’, Russia Briefing, 17 March 2020. https://www.russia-briefing.com/news/uzbekistan-commits-eaeu-observer-nation.html/ [6]
5. ‘Uzbekistan to become observer in Russia led Eurasian Economic Union’, Euraactiv, 9 March 2020. https://www.euractiv.com/section/central-asia/news/uzbekistan-to-become-observer-in-russia-led-eurasian-economic-union/ [7]
6. Umida Hashimova, ‘Uzbekistan Appears to Settle on Observing the Eurasian Economic Union’, The Diplomat, 2 March 2020. https://thediplomat.com/2020/03/uzbekistan-appears-to-settle-on-observing-the-eurasian-economic-union/ [8]
7. Export Import Data Bank, Department of Commerce, Ministry of Commerce & Industry, Government Of India. https://commerce-app.gov.in/eidb/iecnt.asp [9]

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