Russia's competition with China for dominance in Central Asia has long appeared to be doomed due to the asymmetrical relationship between Russian and Chinese economic power. The already strong Chinese economic position in the region has grown even stronger recently with Beijing's announcement of large initiatives that are to pour billions of dollars of aid into the region, further tying it to China.
Chinese President Xi Jinping announced earlier this month that China would commit $40 billion to a "Silk Road Fund" meant to finance infrastructure and development projects throughout Asia, with at least $16 billion of the fund dedicated to projects in Central Asia. In Tajikistan alone China has pledged to invest $6 billion over the next three years, according to the country's deputy finance minister. China has already invested billions of dollars in the natural gas pipeline network connecting Central Asian producers to China, dramatically altering the relationship of these providers with Russia, which has traditionally been the recipient of most natural gas from Central Asia. Between China's "March West" strategy, the investments that are part of the "Silk Road Fund", and the newly-announced Chinese-led, Asian Infrastructure Development Bank, China's economic might aimed at the region has increasingly sidelined Moscow in Central Asia and boxed Russia out of markets in which it has traditionally held dominant sway.
The economic asymmetry between Russia and China has grown even more stark due to the effects of Moscow's self-inflicted wounds and falling energy prices. Russian economic difficulties appear to be dragging the neighboring Central Asian economies down with it, despite the increased Chinese economic links, reinforcing the impression within the region that Russia is not a good economic partner. As one example, Central Asian economies are heavily dependent upon imports, the price of which have been rising dramatically as Central Asian currencies have been losing value along with the ruble. Kazakhstan, Kyrgyzstan and Tajikistan have all had to intervene and use their relatively limited reserves to attempt to prop up their currencies as they slide downward with the ruble. At the same time, cash transfers from the millions of Central Asian migrants to Russia to their relatives at home have begun to dry up as Russia's economic difficulties have hit the migrant community hard. Such transfers make an outsized contribution to the economies in the region. According to figures from the European Bank for Reconstruction and Development, cash transfers from these migrants make up approximately 30% of Kyrgyzstan's economy and 50% of Tajikistan's economy. The World Bank estimated last month that remittances from migrants were down across the region by 9%. Lastly, numerous Russian financing of projects in Central Asia, in which political goals appeared to be more important than economic, appear to be unravelling, arguably because the combination of Western sanctions and falling energy prices have hurt the ability of the Russian energy giants funding these projects to follow through. It appears likely that the pain brought by Russian economic difficulties will only worsen over the next year throughout Central Asia, and will hit particularly hard those most closely tied to Moscow through its Eurasian Economic Union (EEU).
All of this has made Vladimir Putin's task of attempting to convince neighbors to tie themselves to Russia by joining the EEU that much more difficult and has tilted the field even further in the direction of China in Central Asia. Having little in the way of a carrot with which to convince neighbors to join, Putin has resorted to use of the stick, using chokeholds and bullying to pressure neighbors into joining. Armenia is a case in point, and Putin's approach to Armenia has been replicated in his approach to potential EEU members from Central Asia. Armenia had just completed negotiations on a free trade pact with the EU in July 2013, when in early September Putin called Armenian President Serzh Sargsyan to Moscow where the two suddenly announced that Armenia would instead be joining Russia's Eurasian Customs Union. Armenia stands to lose quite a bit by being bound to Russia rather than having a free trade relationship with the EU, which is Armenia's number one trade partner. Armenia will also likely face retaliation from its fellow World Trade Organization (WTO) trade partners due to the fact that the EEU would encourage Armenia to raise tariffs on non-EEU trade partners, which would obviously violate Armenia's WTO commitments. However, the Kremlin's leverage over Armenia is significant – among other points of leverage Moscow guarantees Armenian security (despite also selling arms to Armenia's stronger, neighboring rival, Azerbaijian, an arms relationship that helps to emphasize the importance of Armenia not acting contrary to Moscow's expressed wishes).
In Central Asia, the government of Kyrgyzstan (for which China is the number one trade partner) has finally agreed to join the EEU but only after much arm-twisting on the part of Moscow and after publicly repeating the fact that it had little alternative. Kyrgyz President Almazbek Atambayev did not exactly give the EEU a ringing endorsement when he explained the reason for his country joining by starkly stating that "we have no choice". Kyrgyz Prime Minister Djoomart Otorbaev echoed that sentiment. Even feeling as if they have no choice, and the fact that Russian energy giant Gazprom has completely taken over the Kyrgyz gas industry, the Kyrgyz leadership is still attempting to hold the EEU at arms length. After previously pledging to fully join by the end of 2014, Kyrgyzstan is now saying that it will need until 2020 to "fully complete the process".
In the case of Kazakhstan, membership in the Eurasian Customs Union (which is the forerunner of what will become the EEU as of January 1, 2015), has already hurt the Kazakh economy. An economist with the respected Peterson Institute wrote last year that Kazakh membership in the Customs Union had, through nearly doubling its customs tariffs on trade with non-Customs Union trade partners, forced the Kazakh middle class to purchase poorly-made Russian cars rather than better quality European vehicles and had also halted the nearly-completed process of joining the WTO. In addition to these economic concerns, there are now also major political concerns on the part of Astana. Kazakhstan's longtime President, Nursultan Nazarbayev, has always sought to maintain good relations with Moscow for several reasons, including the fact that Kazakhstan exports a large portion of its oil through Russian pipelines and the fact that Kazakhstan has a large Russian minority in the north. Despite the country's traditional support for Moscow, however, the Russian adventure in the Crimea and in eastern Ukraine, given Kazakhstan's large minority of ethnic Russians and Putin's repeated assertions of his right to ensure "the security" of such Russian minorities among Russia's neighbors, appears to be making Nazarbayev, and all Kazakhs, nervous. Nazarbayev, who was one of the original visionaries of a Eurasian Economic Union long before Vladimir Putin had any power in Russia, has therefore poured cold water on Putin's hopes that the union would become more of a political union rather than just a trade union, and consistently fought attempts to include political provisions in the accession treaty, according to pointedly public statements by the Kazakh Foreign Ministry. The public back and forth between Moscow and Astana over the past few months, in which Putin has sounded distinctly threatening tones drawing uncomfortable links between Russia's relationship with Ukraine on the one hand and its relationship with Kazakhstan on the other (and with Putin ominously, at one point, asserting that Kazakhstan really had little independent national identity), has highlighted the rising tensions and reason for mistrust on the part of the Kazakhs.
To the extent that Putin has succeeded in gaining members of the EEU, therefore, these members are not exactly overjoyed to be tying themselves more closely to Russia. It is true that Putin has succeeded in the short term in gaining new members to the EEU, in solidifying Russian control over the energy industries in some of these countries (most notably Kyrgyzstan), and in making some gains in his competition with China in Central Asia. China is still seen as by far the more reliable partner in the region, however.
The further downward the Russian economy spirals, and the greater the downward force that this spiral places on the neighboring economies, the more Putin will need to rely upon bullying in order to force neighbors to agree to join the EEU. The need for Russian bullying, and the fact that even with significant Russian pressure the various leaders of Russia's neighbors are still reticent to place themselves firmly in Moscow's orbit, is telling. Unwilling partners are unlikely to make for stable, long-term relationships. It is apparent, therefore, that whatever gains Putin appears to be making in the near term are likely to be only temporary.
